Which of the Following Combinations of Direct-Material Variances Might Prompt

question 64

Multiple Choice

Which of the following combinations of direct-material variances might prompt management to undertake a detailed variance investigation?

• A) Price, unfavorable; quantity, unfavorable.
• B) Price, unfavorable; quantity, favorable.
• C) Price, favorable; quantity, unfavorable.
• D) Price favorable; quantity, favorable.
• E) All of the other answers are correct.

---

Definitions:

Average Variable Cost

The total variable cost of producing a good divided by the quantity of the good produced, representing the variable cost per unit.

Average Total Costs

The total costs of production (fixed plus variable) divided by the total quantity of output produced, expressing the cost on a per-unit basis.

Economies of Scale

The savings that organizations achieve through their size of operation, where the expense per produced unit consistently decreases with an upscaling in operation.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's size or output increases beyond a certain point.