Asked by Austin Braun on Apr 30, 2024
Verified
Which of the following is not a reason standard costs are separated into two components?
A) The price and quantity variances need to be identified separately to correct the actual major differences.
B) Identifying variances determines which manager must find a solution to major discrepancies.
C) If a negative variance is overshadowed by a favorable variance, managers may overlook potential corrections.
D) Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results.
Price Variances
Differences between the actual prices paid for goods or services and the expected or standard prices.
Quantity Variances
The difference between the expected amount of inputs needed for production and the actual amount used, often analyzed in cost accounting to assess efficiency.
Standard Costs
Predetermined or estimated costs of manufacturing, selling, or performing a service, used as targets and benchmarks against actual costs.
- Analyze the reasons behind separating standard costs into price and quantity components.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
D
Explanation :
Standard costs are separated into price and quantity components primarily to identify where variances occur, assign responsibility, and ensure that negative variances are addressed. The separation is not specifically about revising budgets closer to actual results, but about managing and controlling costs effectively.
Learning Objectives
- Analyze the reasons behind separating standard costs into price and quantity components.