In standard costing, what do price variances and quantity variances represent?

• A. Price variances relate to the cost of waste materials.
• B. Quantity variances reflect spend on inputs.
• C. Price variances reflect spending on inputs, while quantity variances reflect usage efficiency.
• D. Both variances relate to demand fluctuations.

Answer: (C)

In standard costing, we separate how much we spend on inputs from how efficiently we use them. The price variance shows how much the actual price paid per unit differs from the standard price, which is a reflection of spending on inputs. The quantity variance shows how much of the input was used compared with what should have been used for the actual output, highlighting usage efficiency. This is why the correct interpretation is that price variances reflect spending on inputs, while quantity variances reflect usage efficiency. The other statements don’t fit because price variance isn’t about waste, quantity variance isn’t about total spend, and these variances aren’t about demand fluctuations.