If the Total Materials Variance (Actual Cost of Materials Used

question 5

Multiple Choice

If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable,why must this variance be further evaluated as to price and usage?

• A)There is no need to further evaluate the total materials variance if it is favorable.
• B)Generally accepted accounting principles require that all variances be analyzed in three stages.
• C)All variances must appear in the annual report to equity owners for proper disclosure.
• D)It is done so that management can evaluate the efficiency of the purchasing and production functions.

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Definitions:

Undue Influence

An improper or unlawful exercise of power by one person over another to compel that person to act against his or her will, often seen in contractual or testamentary contexts.

Voidable

A term used for contracts or agreements that are valid until they are canceled or nullified by one party due to certain reasons.

Ordinary, Reasonable Person

refers to a hypothetical individual in law whose behavior would be considered typical or normal in any given circumstances, used as a standard of comparison.

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against the person.