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:

Beginning Inventory

The value of all inventory held by a company at the start of an accounting period.

Gross Profit

Gross Profit is the financial metric calculated by subtracting the cost of goods sold (COGS) from total sales revenue.

Purchases

The total amount expended on goods or services intended for use in the business process.

LIFO

"Last In, First Out," an inventory valuation method where the most recently produced or purchased items are the first to be expensed.