Asked by Victor Nwakaihe on May 20, 2024
Verified
A favorable cost variance occurs when the actual cost is less than the standard cost.
Cost Variance
The difference between the expected (budgeted) cost of an activity and the actual cost incurred, used in budgeting and financial reporting to monitor performance.
Standard Cost
A predetermined cost of manufacturing, projecting what each product should cost under normal conditions.
Actual Cost
Actual cost is the true amount of money spent on producing a product, completing a project, or conducting an activity, including all direct and indirect expenses.
- Perceive the computation methods and significance of favorable and unfavorable variances.
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Learning Objectives
- Perceive the computation methods and significance of favorable and unfavorable variances.
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