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Explain What Each of the Following Variances Indicates,and Discuss What

question 43

Essay

Explain what each of the following variances indicates,and discuss what conditions might have caused each variance.
Direct material price variance: $1,000 U
Direct material quantity variance: $1,500 F
Direct labor rate variance: $800 F
Direct labor efficiency variance: $300 U


Definitions:

Externalities

Economic side effects or by-products that affect an uninvolved third party; can be positive or negative.

Pollution Abatement

Measures and processes undertaken to reduce, control, or eliminate pollution from various sources.

Optimal Amount

The quantity of a good or service that yields the highest utility or benefits under specific conditions.

Moral Hazard

A situation in economics where one party is more likely to take risks because another party bears the costs of those risks.

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