Abita Manufacturing has prepared the following flexible budget for October and it is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.

-The MOST LIKELY explanation of the above variances for Material A is that:
A)a lower price than expected was paid for Material A.
B)higher quality raw materials were used than were planned.
C)the company used a new supplier.
D)Material A used during October was $2,000 less than expected.

Question

Abita Manufacturing has prepared the following flexible budget for October and it is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
 
-The MOST LIKELY explanation of the above variances for Material A is that:
A)a lower price than expected was paid for Material A. 
B)higher quality raw materials were used than were planned. 
C)the company used a new supplier. 
D)Material A used during October was $2,000 less than expected.

Quizplus · Accepted Answer

The most likely explanation for the variances is that a lower price than expected was paid for Material A, as this directly impacts the cost variance without implying anything about the quantity used or the quality of the materials.

Abita Manufacturing Has Prepared the Following Flexible Budget for October