Page 398 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 15

10.1 Variance investigation

Factors to consider include the following:

 the size/significance of the variance

 whether favourable/adverse – firms often treat adverse variances as more
important than favourable

 correction costs versus benefits

 ability to correct

 past pattern

 budget reliability

 reliability of measurement/recording systems.

Test your understanding 12

The material usage variance for last period was $3,400 adverse.

Which of the following reasons could have contributed to this variance?
Select all that apply

Tick

Output was higher than budgeted

The purchasing department bought poor quality material

The original standard usage was set too high

Market prices for the material were higher than expected

An old, inefficient machine was causing excess wastage

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