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Interpret offsetting material variances: price vs. usage

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Consider a situation where the materials price variance is favorable and the materials quantity variance is unfavorable. How would you explain that situation?

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Solution Summary

Your discussion is 254 words and interprets the two variances first and then explains how they may or may not be related and why.

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Interpret a favorable price variance:

If your materials price variance is favorable, that means you purchased it at below the standard price. You got a deal, or a discount or perhaps bought from a new vendor or tried a lower grade of materials and so spent less per pound/foot/part acquiring the materials.

Interpret an unfavorable quantity variance:

If your quantity variance is ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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