Question

Which of the following is not true of variances?

	A.	Material spending (total) variance = Price variance + Quantity variance.
	B.	Spending (total) variance = Actual cost  – Standard cost
	C.	If a cost variance is negative, it is favorable.
	D.	(Price variance) X (Quantity variance) < 0

Answer 1

Answer : option C

Explanation :

Cost variances may be either positive or negative figures. Negative figures happen if you spend more on a project than you allowed in your budget. Positive figures result if you spend less on a project than the budget predicted. Negative cost variance figures are almost always a bad thing for a business, as companies cannot always guarantee they can come up with the funds to cover the excess cost. If a cost Variance is negative then it is unfavourable.