What Is Characteristic of Direct Materials Variances

question 98

Multiple Choice

What is characteristic of direct materials variances?

• A) The materials usage variance uses the actual quantity of materials purchased.
• B) The materials price variance uses the actual quantity of materials purchased rather than the actual quantity of materials used.
• C) The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased.
• D) The sum of the price and usage variances will add up to the total materials variance even if the amount of materials purchased is different from the amount of materials used.

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Definitions:

Residual Value

The forecasted sale price of an asset at the conclusion of its operational lifespan.

Economic Life

The period during which an asset is expected to be usable for the purpose it was acquired.

Lease Receivable

An asset account that records the amount due to be received by a lessor from a lessee under the terms of a lease agreement.

Sales-type Lease

A type of lease where the lessor recognizes immediate profit on the lease, similar to a sale, often used in equipment and vehicle financing.