Asked by Jalen Taylor on Apr 25, 2024
Verified
When the actual cost of direct materials used exceeds the standard cost, the company must have experienced an unfavorable direct materials price variance.
Standard Cost
A predetermined cost of manufacturing, purchasing, or using a product or service, used in budgeting and variance analysis.
- Absorb the theory behind variance analysis as well as its critical components, which involve controllable, volume, price, and quantity variances.
- Identify and calculate direct labor and materials cost variances, and understand their impacts on financial performance.
Verified Answer
AC
aditi chatterjee7 days ago
Final Answer :
False
Explanation :
An unfavorable direct materials price variance indicates that the actual price per unit of materials was higher than the standard or expected price. However, if the actual cost of direct materials used exceeds the standard cost, it could be due to either an unfavorable price variance (paying more per unit than expected) or an unfavorable quantity variance (using more materials than expected), or both.
Learning Objectives
- Absorb the theory behind variance analysis as well as its critical components, which involve controllable, volume, price, and quantity variances.
- Identify and calculate direct labor and materials cost variances, and understand their impacts on financial performance.
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