If the Total Materials Variance (Actual Cost of Materials Used

question 5

Multiple Choice

If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable,why must this variance be further evaluated as to price and usage?

• A)There is no need to further evaluate the total materials variance if it is favorable.
• B)Generally accepted accounting principles require that all variances be analyzed in three stages.
• C)All variances must appear in the annual report to equity owners for proper disclosure.
• D)It is done so that management can evaluate the efficiency of the purchasing and production functions.