An Unfavourable Price Variance May Occur Because

question 45

Multiple Choice

An unfavourable price variance may occur because:

• A) The price of direct materials increased
• B) The price of direct materials decreased
• C) The manufacturing process is more efficient
• D) The manufacturing process is less efficient

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Definitions:

Standard Material Quantity

The specified amount of materials expected to be used in production, serving as a benchmark for cost control and efficiency.

Actual Production

The actual quantity of goods or services produced by a company during a specific period.

Normal Production

Denotes the expected volume of production achieved under standard operating conditions, without unusual increases or decreases.

Materials Price Variance

The difference between the actual cost of materials and the expected cost, indicating how effectively a company is managing its raw material costs.