Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Introduction to Ratios

Financial Accounting

14. Financial Statement Analysis

Introduction to Ratios

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Multiple Choice

Which type of variance is defined as the difference between the actual price per unit and the standard price per unit?

Quantity variance

Efficiency variance

Volume variance

Price variance

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Verified step by step guidance

Understand the concept of variance: Variance analysis is a tool used in financial accounting to measure the difference between expected (standard) and actual performance. It helps identify areas where performance deviates from expectations.

Define price variance: Price variance specifically measures the difference between the actual price paid per unit and the standard price expected per unit. This variance focuses on cost differences rather than quantity or efficiency.

Differentiate price variance from other types of variances: Quantity variance relates to the difference in the number of units used versus expected, efficiency variance measures how efficiently resources are used, and volume variance deals with differences in production or sales volume. Price variance is solely concerned with price differences.

Recognize the formula for price variance: The formula is typically expressed as:

Price Variance = (Actual Price - Standard Price) \times Actual Quantity

. This formula highlights the impact of price differences on total cost.

Apply the concept: To calculate price variance in practice, you would substitute the actual price, standard price, and actual quantity into the formula. This helps determine whether the variance is favorable (actual price is lower than standard price) or unfavorable (actual price is higher than standard price).