A favourable material usage variance arises when:
Correct answer: C. Actual quantity is below standard quantity for actual output
- A. Actual quantity is above standard quantity for actual output
- B. Actual price is below standard price for actual purchases
- C. Actual quantity is below standard quantity for actual output
- D. Actual price is above standard price for actual purchases
Explanation
Material usage variance compares the quantity actually used with the standard quantity allowed for the actual output, usually at standard price. A price variance, not a usage variance, results from paying more or less than the standard price.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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