Question

A decrease in direct materials costs often results in a,a. Favorable sales volume variance. b. None of the answers are correct. c. Unfavorable sales volume variance. d. Unfavorable sales price variance.

Answer 1

Answer:

B) None of the answers are correct.

Explanation:

Lower costs of direct materials result in favorable material cost variance, this means that the estimated costs of production where actually higher than the actual costs of production.

Lower production costs should help the company either increase sales volume by decreasing price, or increase profit margins. But the company will decide which approach to take, either sell more units or earn more money per unit sold.

Answer 2

Answer: The correct answer is "b. None of the answers are correct.".

Explanation: A decrease in direct materials costs means that a lower price than planned was paid for materials therefore it is favorable to the company since it will have less costs than planned and as a consequence a greater profit on each sale.