Which statement is true about the analytical focus in standard costing?

Which statement is true about the analytical focus in standard costing?

• A. Price variance and quantity variance.
• B. Only volume variance is analyzed.
• C. Overhead variance is the only variance.
• D. No variances are analyzed.

Answer: (A)

In standard costing, you explain why actual costs differ from standard costs by splitting the variance into two main kinds: price (rate) variance and quantity (usage) variance. The price variance shows whether you paid more or less per unit than the standard rate, while the quantity variance shows whether you used more or fewer inputs than the standard quantity for the actual production. This framework applies to direct materials and direct labor, and it also extends to overhead with its own spending and efficiency/volume analyses, but the core analytical focus remains on these two variance types. That’s why the statement that price variance and quantity variance are the focus is correct. The other options misstate the emphasis by claiming only volume variance, only overhead variance, or no variances are analyzed.

In standard costing, you explain why actual costs differ from standard costs by splitting the variance into two main kinds: price (rate) variance and quantity (usage) variance. The price variance shows whether you paid more or less per unit than the standard rate, while the quantity variance shows whether you used more or fewer inputs than the standard quantity for the actual production. This framework applies to direct materials and direct labor, and it also extends to overhead with its own spending and efficiency/volume analyses, but the core analytical focus remains on these two variance types. That’s why the statement that price variance and quantity variance are the focus is correct. The other options misstate the emphasis by claiming only volume variance, only overhead variance, or no variances are analyzed.