A Favorable Cost Variance of Significant Magnitude

question 16

Multiple Choice

A favorable cost variance of significant magnitude:

• A)is the result of good planning.
• B)may lead to improved production methods if it is investigated.
• C)indicates that management does not need to be concerned about lax standards.
• D)does not need to be investigated.

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Definitions:

Deferred

A term indicating that something has been postponed or delayed, often referring to income, taxes, or expenses.

Inventories

Assets held for sale in the ordinary course of business, or materials that will be used in the production of goods to be sold.

Year 2

Typically refers to the second year of a company's operations or performance being analyzed.

Variable Costing

An accounting method in which variable costs are charged to cost units and fixed costs are treated as period costs and directly charged to the profit and loss account.