Abbot Company Spent Less Than Expected for Materials and More

question 84

Multiple Choice

Abbot Company spent less than expected for materials and more than expected for labor.Select the incorrect statement from the following.

• A) You can always expect unfavorable labor variances if you have favorable material variances.
• B) In order to facilitate cost control, it will be necessary to analyze the price and quantity of each resource used in production.
• C) It cannot be determined from the information provided whether employees were paid higher wages or if they worked more hours.
• D) It cannot be determined from the information provided whether the company paid a lower purchase price for materials or if workers used less materials.

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Definitions:

Perfect Substitutes

Goods that a consumer is completely indifferent between, meaning they will substitute one for another at a constant rate regardless of any change in price or utility.

Perfect Complements

Goods that are always used together in fixed proportions, where the utility or value of one item increases with use of the other.

Pareto Efficient

An allocation condition in resources where any attempt to favor one individual results in a disadvantage to another.

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate without making at least one individual or preference criterion worse off.