Sometimes a Favourable Direct Materials Efficiency Variance May Signal a Need

question 57

True/False

Sometimes a favourable direct materials efficiency variance may signal a need to change product strategy,perhaps because the product cannot be made at a low enough cost.

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Definitions:

Prevention Costs

Expenses incurred to avoid defects in products or services, including costs related to quality control and training.

Appraisal Costs

Costs associated with inspecting and testing both raw materials and finished products to ensure quality standards are met.

Internal Failure Costs

Costs associated with defects found before the delivery of a product to the customer, such as scrap and rework expenses.

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.