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8,900 pounds of material are used in production when 8,600 pounds were budgeted. How is that result described?
AFavourable, because more material was available
BUnfavourable, because more was used than planned
CFavourable, because the price was held constant
DUnfavourable, because the standard was too high
Answer & Solution
Correct answer: B. Unfavourable, because more was used than planned
1. A quantity or a unit cost above its standard is unfavourable, because more was consumed or spent than planned.
2. Usage of 8,900 pounds exceeds the standard of 8,600 pounds by 300 pounds.
3. The result is therefore unfavourable.
4. A rate of $9 per labour hour against a $10 standard would be favourable, since it falls below what was anticipated.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 8.1 Introduction_
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