"A Favorable Direct Materials Price Variance Is Always Good for a Company

question 42

Essay

"A favorable direct materials price variance is always good for a company." Is this statement true? Justify your answer.

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Definitions:

Normal Selling Price

The standard amount charged to customers for a good or service under normal market conditions.

Beginning Inventory

The value of goods available for sale at the start of an accounting period, before any purchases or sales have occurred.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Purchases

The total amount spent on goods and services for the purpose of resale or use in production within a given accounting period.