Management Accounting Uses Variance Analysis to Explain What and Why

question 40

Multiple Choice

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the price of raw materials unexpectedly decreases below the standard price?

• A) Unfavorable price variance
• B) Favorable price variance
• C) Unfavorable quantity variance
• D) Favorable quantity variance

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Definitions:

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An association of manufacturers or suppliers that agree to fix prices, limit supply, or restrain competition in a particular market.

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