A Favourable Variance

question 23

Multiple Choice

A favourable variance

• A)is an indication that the company is not operating in an optimal manner.
• B)implies a positive result if quality control standards are met.
• C)implies a positive result if standards are flexible.
• D)means that standards are too loosely specified.

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Definitions:

Class Life

The expected useful lifetime of a fixed asset, which determines the depreciation rate for tax and accounting purposes.

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life to reflect its decrease in value over time.

After-Tax Cash Flow

After-tax cash flow is the net cash flow generated from business activities after accounting for taxes, indicating the actual cash a company has on hand after tax obligations.

Capital Asset

A long-term asset that is not purchased or sold in the normal course of business but is used to generate wealth through investment or appreciation.