Variance Analysis (5)

Question 1

Advantage of a system of planning and operational variances (controllable)

Answer 1

Analysis highlights those variances which are controllable (operational variances) and those which are non-controllable (planning varikances)

Question 2

Advantage of a system of planning and operational variances (acceptance)

Answer 2

Manager’s acceptance of the use of variances for performance measurement

Question 3

Advantage of a system of planning and operational variances (standard)

Answer 3

Planning and standard-setting should improve. Standards should be more accurate and reelvant

Question 4

Advantage of a system of planning and operational variances (operational variance)

Answer 4

Operational variances will provide a more realistic and “fair” reflection of actual performance

Question 5

Disadvantage of a system of planning and operational variances (hindsight)

Answer 5

Difficult to decide in hindsight what realistic standard should have been

Question 6

Disadvantage of a system of planning and operational variances (bad planning)

Answer 6

May become too easy to justify all variances as being due to bad planning, so no operational variances are highlighted

Question 7

Disadvantage of a system of planning and operational variances (time-consuming)

Answer 7

Establishing realistic revised standards and analysing the total variance into planning and operational variances can be a time-consuming task

Question 8

Disadvantage of a system of planning and operational variances (resistant)

Answer 8

Managers may be resistant to the very idea of variances and refuse to see the virtues of the approach