Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the usage of raw materials unexpectedly decreases below the standard quantity used?
A) Unfavorable price variance
B) Favorable price variance
C) Unfavorable quantity variance
D) Favorable quantity variance

Question

Quizplus · Accepted Answer

When the usage of raw materials decreases below the standard quantity, it is considered a favorable quantity variance because less material was used than expected, indicating efficiency in material usage.

Management Accounting Uses Variance Analysis to Explain What and Why