The Flexible Budget Breaks Down into the Price and Quantity

question 191

Essay

The flexible budget breaks down into the price and quantity variances for direct materials.

Required:

a. List two reasons why actual prices might differ from standard prices, resulting in a direct materials price variance.

b. List two reasons why actual materials usage might differ from standard material usage, resulting in a direct materials quantity variance.

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Definitions:

Bonds

Bonds are fixed income instruments representing a loan made by an investor to a borrower, typically corporates or governments, which pay periodic interest payments and return the principal at maturity.

Security Analysis

The examination and evaluation of the various factors affecting the value of securities, such as stocks and bonds, to make investment decisions.

Professional Analysts

Professionals who conduct detailed examination and evaluation of various aspects in finance, economics, or other specialized fields.

C-corporations

A legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity, providing liability protection for the owners.