Which statement best describes a favourable material price variance?
Correct answer: C. Actual price is lower than standard price
- A. Actual price is higher than standard price
- B. Actual quantity exceeds standard quantity
- C. Actual price is lower than standard price
- D. Standard quantity is lower than actual quantity
Explanation
A favourable material price variance occurs when the actual purchase price is below the standard price for the actual quantity bought. Quantity usage is measured by a separate material usage variance.
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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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