When Would a Variance Be Labeled as Favorable

question 107

Multiple Choice

When would a variance be labeled as favorable?

• A) When actual costs are less than standard costs
• B) When standard costs are equal to actual costs
• C) When standard costs are less than actual costs
• D) When estimated costs are greater than actual costs

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Definitions:

Production

The process of creating goods and services using inputs such as labor, capital, and raw materials.

Consumption

The use of goods and services by households, contributing to their wellbeing and the overall economy.

MRS

Marginal Rate of Substitution, the rate at which a consumer is ready to exchange quantities of one good for another good while maintaining the same level of utility.

MRT

MRT, or Marginal Rate of Technical Substitution, measures the rate at which one input can be reduced per additional unit of another input, keeping output constant.