ExpertEasy1 markMultiple Choice
CPA · Question 33 · Area I: Business Analysis
Which of the following events would likely result in an unfavorable Direct Materials Price Variance?
Which of the following events would likely result in an unfavorable Direct Materials Price Variance?
Answer options:
A.
Purchasing materials in larger quantities to get a bulk discount.
B.
A switch to a higher-quality supplier with better grade materials.
C.
A decrease in the market price of raw materials.
D.
Using less material than standard per unit.
How to approach this question
Price Variance = (Actual Price - Standard Price). Unfavorable means Actual > Standard. Look for reasons why price would increase.
Full Answer
B.A switch to a higher-quality supplier with better grade materials.✓ Correct
B
An unfavorable price variance occurs when the actual price paid is higher than the standard price. Switching to higher-quality materials typically increases the purchase price.
Common mistakes
Confusing price variance with usage variance.
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