A Favorable Cost Variance Occurs When Actual Cost Is Less

question 112

True/False

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

---

Definitions:

Product Costs

Costs that are incurred to acquire or manufacture a product and include direct materials, direct labor, and manufacturing overhead.

Relevant Range

The band of normal activity level or volume in which specific fixed and variable cost assumptions hold true.

Financial Reporting

Financial reporting involves the disclosure of financial results and related information by a company to its stakeholders, to help in making economic decisions.

Period Costs

Costs that are not directly tied to the production process and are expensed in the period they are incurred, such as sales, general, and administrative expenses.