Question

Which of the following is not true of variances? A. Material spending (total) variance = Price...

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
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Homework Answers

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.

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