When the Quantity of Materials Purchased Is Not Equal to the Quantity

question 43

Multiple Choice

When the quantity of materials purchased is not equal to the quantity of material used, most companies base the calculation of the material quantity variance on the:

• A) quantity of direct materials purchased.
• B) quantity of direct materials spoiled.
• C) quantity of direct materials that should have been used in achieving actual production.
• D) quantity of direct materials actually used.
• E) none of the other answers are correct.

---

Definitions:

Actual Hours Incurred

The real number of hours worked or used in the completion of a task or production of a good, as opposed to the estimated hours.

Materials Price Variance

The difference between the actual cost of materials and the expected (standard) cost multiplied by the quantity of materials used.

Standard Costing System

A cost accounting system that uses standard costs for product costs and measures variances to actual costs for performance evaluation.

Overhead Volume Variance

The difference between the expected (budgeted) overhead costs and the actual overhead allocated based on actual volume of production.