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Rj Froehlich

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Q: When would a variance be labeled as favorable?
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Why would a favorable price variance for material might be the cause of unfavorable quantity variance?

A favorable/unfavorable price variance does not effect your quantity variance. The reason you would see a favorable price variance and an unfavorable quantity variance is because you consumed more materials than your standard allows AND the price you paid for those material was less than your standard price. If you paid more than your standard price, you would have experienced an unfavorable variance in both quantity and price.


What is favourable variance?

A favorable variance is the difference between the budgeted or standard cost and the actual cost. If the actual cost is less than budgeted or standard cost, it is a favorable variance.


What difference between a favorable variance and an unfavorable variance?

Favourable variance is that variance which is good for business while unfavourable variance is bad for business


What does a favorable direct materials efficiency variance indicate?

A favorable direct materials efficiency variance indicates that you are using less material in production than was budgeted for.


What is favourable?

A favorable variance is the difference between the budgeted or standard cost and the actual cost. If the actual cost is less than budgeted or standard cost, it is a favorable variance.


If the controllable overhead variance is favorable the overhead volume variance?

volume variance relates to Fixed cost absorption, where as controllable variances arise due difference in actual variable spending per activity measure.


A favorable fixed overhead volume variance occurs if?

Favourable fixed overhead variance occurs when actual fixed cost is less than the budgeted fixed overhead expenses.


Why a favorable direct materials price variance might be of concern?

A favorable direct materials price variance may be the result of the purchase of cheaper materials that may be of inferior quality, thereby causing an inferior product. An inferior quality can also cause more spoilage and waste.


Why a favorable fixed overhead expenditure variance might be reported?

The price variance might result from use of cheaper but inferior quality materials hence though it will be cheaper , the final product will be compromised .


Favorable materials quanity variance?

In cost accounting, a variance is the difference between what we expected to happen (what we planned for when we created the budget) and what actually happened. If we produce more units from a given quantity of raw material than we expected to produce when we set up the budget, we have a favorable materials quantity variance, because we produced the goods more efficiently than we had planned for. We have used the raw materials with less waste than expected.


A favorable spending variance occurs when the actual cost is less than the amount of that cost in the flexible budget true or false?

True


Are unfavorable variances credits or debits?

For most accounting entities in the United States, variances are neither debits nor credits, because variances are not recorded on the books of a business. A variance is simply the difference between what we expected the business to earn or spend and what it actually did earn or spend. Only the things that actually did happen are recorded on the books. But the amount we had expected to earn at the beginning of the year can be found in the budgets, forecasts or plans we created for the year when we set up budgets for the year. The difference between what we budgeted for and what actually happened is called the variance from budget. For example, if at the beginning of 2008, we projected that we would have total sales of $5 million dollars for the entire year, but twelve months later, we found that we had had only $4 million in sales in 2008, there is a variance of $1 million dollars, and it is unfavorable, because we actually had less sales revenue than we thought we would earn at the beginning of the year. But if our actual sales for 2008 totalled $6 million, the variance would still be $1 million, but it would be a favorable variance, because we made $1 million more in sales ($6 million) than we originally thought we would (5% million). If actual expenses are higher than the budgeted amount, the difference between the two amounts is an unfavorable variance, because we spent over budget, which reduces our profits. However, if actual expenses are lower than the budgeted amount, the difference is a favorable variance, because we were able to spend less than we thought we would have to, and our profits would be higher.