Which statement best describes variances?
A) A favourable labour rate variance could result from lower wage workers quitting.
B) A favourable materials price variance could result from purchasing materials from another supplier at a lower price.
C) A favourable materials usage variance could result from increased waste caused by not efficiently utilizing raw materials.
D) An unfavourable labour efficiency variance could result from using higher quality materials that result in fewer inspections.

Question

Quizplus · Accepted Answer

A favourable materials price variance means that materials were purchased at a lower price than expected. This could happen if a company found a cheaper supplier or negotiated a better deal with an existing supplier.

Answer: A
 A favourable labour rate variance means that the actual labour cost was lower than the budgeted labour cost. This could happen if lower wage workers were hired or if existing workers with higher wages quit.

Answer: D
 An unfavourable labour efficiency variance means that more hours were required to complete a job than anticipated. Using higher quality materials that result in fewer inspections would improve efficiency, resulting in a favourable labour efficiency variance. Therefore, it cannot be the correct answer.

Answer: C
 A favourable materials usage variance means that fewer materials were used than anticipated to produce a given output. Increased waste caused by not efficiently utilizing raw materials would result in more materials being used, making this statement incorrect.

Which Statement Best Describes Variances