An Unfavorable Materials Price Variance with a Favorable Materials Usage

question 46

Multiple Choice

An unfavorable materials price variance with a favorable materials usage variance would most likely be the result of

• A) machines breaking down
• B) problems with labour efficiency
• C) purchase of high quality materials
• D) problems with labour rates

---

Definitions:

Scrap Equipment

Old or discarded machinery and equipment that has no further use and is usually sold for its material content.

Discounted Payback Period

The time period required for the return on an investment to cover the cost, taking the time value of money into account.

Cash Inflows

Money or other forms of capital coming into a business, often from sales, investments, or financing activities.

Required Rate

The minimum annual percentage return on investment demanded by investors or lenders.