There Has Recently Been an Increase in the Price of Dairy

question 206

Multiple Choice

There has recently been an increase in the price of dairy products used in the production of ice cream. High temperatures have also induced people to consume more ice cream. In the market for ice cream, the effects these changes will have on equilibrium price and quantity are

• A) price will increase, and quantity will decrease.
• B) price will increase, and the effect on quantity is indeterminate.
• C) price will decrease, and quantity will increase.
• D) price will decrease, and the effect on quantity is indeterminate.

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Definitions:

Direct Material Quantity Variance

The difference between the budgeted amount of materials needed for production and the actual amount used, expressed in cost or quantity.

Standard Price

The predetermined cost that a company expects to pay for materials, labor, and other inputs, used as a benchmark for variance analysis.

Actual Grams

The real-world measurement of weight for materials used in a production or laboratory setting, as opposed to theoretical or estimated amounts.

Labour Efficiency Variance

The difference between the actual labor hours spent on production and the expected (or standard) labor hours, multiplied by the standard labor rate.