When analyzing variances, it is most likely that management will direct their attention to: (Select all that apply).Multiple select question.small and favorable varianceslarge and unfavorable varianceslarge and favorable variancessmall and unfavorable variances
Question
When analyzing variances, it is most likely that management will direct their attention to: (Select all that apply).Multiple select question.small and favorable varianceslarge and unfavorable varianceslarge and favorable variancessmall and unfavorable variances
Solution
When analyzing variances, management is most likely to direct their attention to:
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Large and unfavorable variances: These are the variances that have a significant negative impact on the company's profits or key performance indicators. They are "large" because they represent a significant difference from the expected or standard costs, and they are "unfavorable" because they are higher than the standard costs. Management would want to investigate the causes of these variances to take corrective actions.
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Large and favorable variances: These are the variances that have a significant positive impact on the company's profits or key performance indicators. They are "large" because they represent a significant difference from the expected or standard costs, and they are "favorable" because they are lower than the standard costs. While these variances are good for the company, management would still want to understand the reasons behind them to ensure they are sustainable and not due to factors such as errors in standard costing or one-off events.
Small variances, whether favorable or unfavorable, are usually considered as normal business variations and may not require immediate management attention unless they start showing a consistent trend over time.
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