An Unfavourable Materials Price Variance with a Favourable Materials Usage

question 12

Multiple Choice

An unfavourable materials price variance with a favourable materials usage variance would most likely be the result of

• A)machines breaking down.
• B)problems with labour efficiency.
• C)purchase of high quality materials.
• D)problems with labour rates.

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Definitions:

Factor Portfolios

Investment portfolios constructed to have a high sensitivity to certain factors or characteristics expected to yield higher returns, such as size, value, or momentum.

Pricing Model

A theoretical approach used to determine the price of a financial instrument or the valuation of a company.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring financial instruments' risk.

Arbitrage Opportunities

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market, earning a risk-free profit.