Chapter 9 Standard costing, flexible budgeting and variance analysis

(b)Management Accounting for Non Specialists 2nd Edition© Catherine Gowthorpe 2005Cengagefixed production overhead varianceActual fixed production overhead 26 201Flexed budget fixed production overhead 26 676475 (F)4. Selly Watkins plc1. An adverse sales price variance indicates that selling pricesactually charged were less than budgeted. The explanationis therefore implausible.2. A better than expected quantity discount on materialspurchases would give rise to a favourable variance. Theexplanation is therefore plausible.3. Higher quality materials would be expected to give rise to afavourable quantity variance. The explanation isimplausible.4. The labour efficiency variance is positive and could wellhave arisen because the production workers are moreefficient than expected. The explanation is plausible.5. This explanation is plausible.10