Variance Analysis (2)

Question 1

What happens in a modern manufacturing environment with an emphasis on quality management?

Answer 1

Using mix and yield variances for control purposes may not be possible or may be inadequate

Question 2

What other control methods could be more useful (Rates)

Answer 2

Rates of wastage

Question 3

What other control methods could be more useful (Average cost)

Answer 3

Average cost of input calculations

Question 4

What other control methods could be more useful (Percentage)

Answer 4

Percentage of deliveries on time

Question 5

What other control methods could be more useful (Customer)

Answer 5

Customer satisfaction ratings

Question 6

What other control methods could be more useful (Yield percentage)

Answer 6

Yield percentage calculations or output to input conversion rates

Question 7

What is a sales max variance?

Answer 7

Occurs when the proportions of the various products sold are different from those in the budget

Question 8

What is sales quantity variance?

Answer 8

Shows the difference in contribution/profit because of a change in sales volume from the budgeted volume of sales

Question 9

What is the total sales variance?

Answer 9

Sales price variance

Sales volume variance

Question 10

What is contained in sales volume variance?

Answer 10

Sales mix variance

Sales quantity variance

Question 11

What happens when it may be appropriate to revise a budget or standard cost?

Answer 11

Variances should be reported in a way that distinguishes between variances caused by revision to budget and variances that are the responsibility of operational budget

Question 12

Changes in assumption sales budget may be based on expectations of total size of the market for the organisation’s product?

Answer 12

Market size may be much larger or smaller (unexpected change in economic conditions, changes in customer attitudes, etc)

Question 13

Changes in assumption standard cost of materials may be based on an assumption about what the market price for the materials should be?

Answer 13

The available market price for materials may become much higher or much lower than originally expected

Question 14

Changes in assumption standard quantity of materials made may be based on product specification

Answer 14

Quantity of materials may be significantly altered due to an unexpected change in specification

Question 15

Changes in assumption standard labour cost may be based on expected labour rates

Answer 15

Standard labour cost may become more unrealistic due to an unexpected increase in pay rates for employees

Question 16

Changes in assumption standard time to produce a unit of product is estimated?

Answer 16

The standard time could be affected by a change in upgraded machinery

Question 17

If the budget or standard cost is not revised in changing circumstances?

Answer 17

Variances reported to operational managers will be unrealistic

Question 18

A large part of variances will be due to?

Answer 18

Changes that are outside the control of operational managers

Question 19

How should a budget revision be allowed?

Answer 19

If something has happened which is beyond the control of the organisation or individual manager and which makes original budget unsuitable for use in performance management