Favorable Volume Variances May Be Harmful When

question 36

Multiple Choice

Favorable volume variances may be harmful when:

• A) machine repairs cause work stoppages.
• B) supervisors fail to maintain an even flow of work.
• C) production in excess of normal capacity cannot be sold.
• D) there are insufficient sales orders to keep the factory operating at normal capacity.

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Definitions:

Produced

The completed output of goods or services as a result of manufacturing or production processes.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost of those materials.

Direct Materials Quantity Variance

The variance between the real amount of materials consumed in production and the anticipated standard amount, multiplied by the cost per unit according to standards.

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services in a manufacturing process.