When a Manufacturing Company Uses Standard Costing Methodology in Their

question 152

True/False

When a manufacturing company uses standard costing methodology in their journal entries and accounts, a favorable variance has the effect of being a contra expense.

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Definitions:

Unfavorable

A term used to describe outcomes or variances that negatively impact a business financially or operationally.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standardized expected quantity, valued at the standard cost per unit.

Direct Materials

Raw materials that are directly traceable to the production of a specific product and are significant in cost.

Favorable

A term usually used in finance and accounting to describe results that are better than anticipated or that result in a benefit.