8. Budgetary Control Using Varience Analysis

Question 1

Why do you need to explain variances?

Answer 1

So that you are in a better position to control these factors in the future to generate a better profit.

Question 2

What do you need to investigate variances?

Answer 2

• The size of the variance
• The controllability of the variance
• The cost of investigating the variance further
• Interrelationships with other variances
• Trend

Question 3

What does adverse mean?

Answer 3

The actual performance is worse than expected

Question 4

What does favourable mean?

Answer 4

The actual performance is better than expected

Question 5

What do you need to look at for material variances?

Answer 5

• The total direct material variance
• The material price variance
• The material usage variance
• Interrelationships

Question 6

What do you need to look at for labour variances?

Answer 6

• Total direct labour variance
• The labour variance
• The labour efficiency variance
• Interrelationships