Final answer:
The false statement about variances is B, which incorrectly claims that a lower actual direct material price than budgeted leads to an unfavorable materials price variance, when in fact it is favorable.
Step-by-step explanation:
The direct answer to which statement about variances is false is option B: if the actual direct material price is less than budgeted, the result is an unfavorable materials price variance. This statement is false because if the actual price is less than budgeted, it is favorable as it indicates cost savings.
When assessing financial performance, variances play a crucial role. A variance is the difference between what was expected, or budgeted, and what was achieved. A favorable variance implies better-than-expected results, such as higher profits, lower costs, or higher sales than budgeted. Conversely, an unfavorable variance indicates worse results than anticipated.
Let's examine the variances mentioned:
- An unfavorable total profit variance occurs if actual profit is less than budgeted (Option A), implying that the company made less profit than anticipated.
- An unfavorable revenue variance results if the actual sales price is less than budgeted (Option C), as the company receives less revenue per unit sold.
- An unfavorable activity variance happens if actual sales volume is less than budgeted (Option E), meaning fewer units were sold than planned.
Therefore, the false statement is that a lower-than-budgeted material price would result in an unfavorable variance, which is contrary to a standard financial interpretation.