A Favorable Direct Materials Price Variance Might Lead to an Unfavorable

question 85

True/False

A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased inferior materials.

---

Definitions:

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, multiplied by the standard cost per unit.

Price Variance

The difference between the expected price and the actual price paid for an item.

Factory Overhead Volume Variance

The difference between the budgeted and actual overhead costs due to variations in the volume of production.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the hours actually worked.