What Does a Favorable Direct Materials Cost Variance Indicate

question 66

Multiple Choice

What does a favorable direct materials cost variance indicate?

• A) The actual quantity of direct materials used was less than the standard quantity.
• B) The actual cost of direct materials purchased was less than the standard cost of direct materials purchased.
• C) The actual cost of direct materials purchased was greater than the standard cost of direct materials purchased.
• D) The actual quantity of direct materials used was greater than the standard quantity.

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Definitions:

Leverage

The practice of leveraging borrowed money to enhance the expected returns on an investment.

Repurchase Shares

A transaction in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

Return on Assets

A profitability ratio that measures how efficiently a company is using its assets to generate earnings.