Question

A quantity (usage, or efficiency) variance equalsA. A flexible budget amount minus a static budget amount.B. Standard unit price times the difference between actual inputs and standard inputs allowed for the actual activity level achieved.C. Actual operating income minus flexible budget operating income.D. Actual unit price minus budgeted unit price, times the actual units produced.

Answer 1

The correct answer is letter "D": Actual unit price minus budgeted unit price, times the actual units produced.

Step-by-step explanation:

Quantity or efficiency variance refers to the difference between the number of inputs budgeted to be used against the inputs that were actually used in production. Labor errors or budgeting mistakes may lead to having a difference between the two figures mentioned previously. While calculating the direct-material usage variance the actual quantity used is subtracted from the standard quantity allowed and the result is multiplied by the standard price.

While calculating the direct-material price variance, it is calculated by subtracting the current unit price minus the actual unit price and multiplying the result by the units produced.