Which of the Following Statements Regarding Trade-Offs Among Variances Is

question 76

Multiple Choice

Which of the following statements regarding trade-offs among variances is true?

• A) Managers generally do not need to consider trade-offs in variance analysis
• B) Managers may sometimes make trade-offs between favorable and unfavorable variances
• C) Unfavorable direct material price variances often lead to unfavorable direct labor efficiency variances
• D) Favorable direct material price variances often lead to favorable direct material efficiency variances

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and the quantity demanded at which their price is stable, and there is no tendency for it to change unless external factors intervene.

Allocative Efficiency

A state of resource allocation where resources are distributed in accordance with consumer preferences, maximizing overall utility.

Equilibrium Price

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers, resulting in market balance.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.