A favorable Direct Materials Quantity Variance occurs when:
AActual price paid per unit of material is less than standard price
BActual quantity of materials used is less than standard quantity allowed for actual production
CTotal actual manufacturing overhead exceeds budgeted overhead
DDirect labor rate paid exceeds standard rate
Explanation
Core Concept: Direct Materials Quantity (Efficiency) Variance = (Actual Quantity Used − Standard Quantity Allowed) × Standard Price. When AQ < SQ, the variance is favorable because fewer raw materials were consumed than budgeted. Context/Distractors: Option A defines a favorable price variance. Exam Tip/Key Fact: Production managers are usually accountable for material quantity variances.
Exam Relevance
- Topic: Cost Accounting
- Subtopic: Standard Costing & Variance Analysis
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