A Favorable Cost Variance Occurs When

question 123

Multiple Choice

A favorable cost variance occurs when

• A) actual costs are more than standard costs
• B) standard costs are more than actual costs
• C) standard costs are less than actual costs
• D) actual costs are the same as standard costs

---

Definitions:

Variable Cost

Costs that change in proportion to the level of production or activity, such as raw materials and direct labor.

Break Even Point

The financial state where total revenues and total expenses are equal, resulting in no net profit or loss for the business.

CVP Graph

A graphical representation used in Cost Volume Profit analysis to depict relationships among cost, volume, and profit, showcasing how changes in sales volume will affect profits.

Total Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.