Respuesta :
The favourable price variance for direct material can be a reason for a decrease in the price of materials due to an oversupply of materials.
Favourable price variance :
A favorable deviation occurs when the cost to produce something is lower than the budgeted cost. This means that the company is making more profit than originally expected. Favorable changes may be the result of increased manufacturing efficiency, reduced material costs, or increased sales.
How do you determine if a price difference is favorable or unfavorable?
If the actual cost incurred is below the standard cost, this is considered a favorable price deviation. If the actual cost incurred is higher than the standard cost, this is considered an unfavorable price deviation.
Is cheap variance always better?
Achieving a favorable (or unfavorable) difference doesn't always mean much. This is because they are based on budgeted or standard amounts that may not perform well.
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