If the total materials variance for a given operation is favorable, why must thi

Question

If the total materials variance for a given operation is favorable, why must this variance be further evaluated as to price and usage?
Answer
a. There is no need to further evaluate the total materials variance if it is favorable. b. Generally accepted accounting principles require that all variances be analyzed in three stages. c. All variances must appear in the annual report to equity owners for proper disclosure. d. A further evaluation lets management evaluate the activities of the purchasing and production functions.

Explanation / Answer

c. All variances must appear in the annual report to equity owners for proper disclosure.

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