Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134067254
Author: Braun
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem 4QC
(Learning Objective 2) Which of the following is true?
- a. Favorable variances should always be interpreted as “good news” for the company.
- b. Management by exception means that managers investigate all unfavorable variances but not all favorable variances.
- c. Favorable variances are variances that cause operating income to be higher than budgeted.
- d. Unfavorable variances should always be interpreted as “bad news” for the company.
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Students have asked these similar questions
Variance analysis is an extremely important tool in accounting, so unfavourable variances must be taken very seriously by accountants and managers”. How would you respond to this statement? Make use of examples in your explanation - 150 words please :)
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Standard costs (e.g., how much should be paid for each unit of input) are benchmarks for measuring performance.
Managers should investigate only unfavorable variances.
Variance analysis enhances responsibility accounting.
A variance is the difference between the budgeted amount and actual amount.
Analyze the variances that you computed in requirements 1 and 2.
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Chapter 10 Solutions
Managerial Accounting (5th Edition)
Ch. 10 - (Learning Objective 1) Companies often...Ch. 10 - (Learning Objective 1) Which of the following is...Ch. 10 - (Learning Objective 1) In terms of responsibility...Ch. 10 - (Learning Objective 2) Which of the following is...Ch. 10 - (Learning Objective 2) A segment margin is the...Ch. 10 - Prob. 6QCCh. 10 - Prob. 7QCCh. 10 - Prob. 8QCCh. 10 - Prob. 9QCCh. 10 - Prob. 10QC
Ch. 10 - Identify and understand responsibility centers...Ch. 10 - Identify types of responsibility centers (Learning...Ch. 10 - Identify centralized and decentralized...Ch. 10 - Prob. 10.4SECh. 10 - Prob. 10.5SECh. 10 - Prob. 10.6SECh. 10 - Calculate ROI (Learning Objective 3) Refer to Epic...Ch. 10 - Prob. 10.8SECh. 10 - Prob. 10.9SECh. 10 - Prob. 10.10SECh. 10 - Prob. 10.11SECh. 10 - Interpret a performance report (Learning Objective...Ch. 10 - Prob. 10.13SECh. 10 - Classify KPIs by balanced scorecard perspective...Ch. 10 - Use vocabulary terms (Learning Objectives 1, 2, 3,...Ch. 10 - Prob. 10.16SECh. 10 - Identify type of responsibility center (Learning...Ch. 10 - Complete and analyze a performance report...Ch. 10 - Prepare a segment margin performance report...Ch. 10 - Compute and interpret the expanded ROI equation...Ch. 10 - Prob. 10.21AECh. 10 - Prob. 10.22AECh. 10 - Comparison of ROI and residual income (Learning...Ch. 10 - Prob. 10.24AECh. 10 - Comprehensive flexible budget problem (Learning...Ch. 10 - Prepare a flexible budget performance report...Ch. 10 - Work backward to find missing values (Learning...Ch. 10 - Construct a balanced scorecard (Learning Objective...Ch. 10 - Sustainability and the balanced scorecard...Ch. 10 - Identify type of responsibility center (Learning...Ch. 10 - Complete and analyze a performance report...Ch. 10 - Prob. 10.32BECh. 10 - Prob. 10.33BECh. 10 - Prob. 10.34BECh. 10 - Prob. 10.35BECh. 10 - Prob. 10.36BECh. 10 - Prob. 10.37BECh. 10 - Prob. 10.38BECh. 10 - Prob. 10.39BECh. 10 - Prob. 10.40BECh. 10 - Prob. 10.41BECh. 10 - Sustainability and the balanced scorecard...Ch. 10 - Prepare a budget with different volumes for...Ch. 10 - Prepare and interpret a performance report...Ch. 10 - Prob. 10.45APCh. 10 - Prob. 10.46APCh. 10 - Prob. 10.47APCh. 10 - Evaluate subunit performance (Learning Objectives...Ch. 10 - Prob. 10.49BPCh. 10 - Prob. 10.50BPCh. 10 - Evaluate divisional performance (Learning...Ch. 10 - Prob. 10.52BPCh. 10 - Determine transfer price at a manufacturer under...Ch. 10 - Evaluate subunit performance (Learning Objectives...Ch. 10 - Prob. 10.55SC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Cost variances are further investigated for price and efficiency variances because: A) It helps to identify which department managers are responsible for major discrepancies and should find solutions. B) All of the answer choices are correct. C) An unfavorable price variance could be overshadowed by favorable efficiency variance and not investigated for potential corrections. D) It is necessary to find out whether the cost variances are due to price variance or efficiency variance for both and take corrective action accordingly.arrow_forwardWhich of the following is not a reason standard costs are separated into two components? a.Identifying variances determines which manager must find a solution to major discrepancies. b.If a negative variance is overshadowed by a favorable variance, managers may overlook potential corrections. c.The price and quantity variances need to be identified separately to correct the actual major differences. d.Variances bring attention to discrepancies in the budget and require managers to revise budgets closer to actual results.arrow_forwardBy comparing the actual findings with the standards and adopting new standards to avoid or reduce deviations, standard cost variance analysis makes it simple for management to evaluate performance against the benchmark. Focusing on the efficiency of the standard cost system and applying any modifications and updates promptly can help to minimize these effects and produce more accurate results when compared to actual data. Do you believe that the standard cost system can help erase these effects completely?arrow_forward
- What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule? Which of the following is the best reason to also follow up on favorable variances? Bias in investigation targets and subsequent reports is reduced. Favorable variances occur more often as activity levels rise. Production efficiencies may be able to be replicated elsewhere in the organization.arrow_forwardManagement accountants must try to implement systems that are acceptable to budget stakeholders to produce positive effects. Now, as a management accountant, choose three (3) negative attitudes, explain them and write yourr ecommendations on how you will address these negative attitudes from a management’s perspective. It couldi ether be a policy that the management will implement or an action that will be undertaken by management to counteract the negative attitude.arrow_forwardWhen actual performance varies from the budgeted performance, managers will be morea. likely revise future budgets if the variances wereb. controllable rather than uncontrollable.c. uncontrollable rather than controllable.d. favorable rather than unfavorable.e. small.arrow_forward
- Consider variance analysis in a service industry. Is it a good thing to use or a bad thing to use? Why? What good behaviors could it encourage? What bad behaviors might it encourage? Consider a service industry you are familiar with or something like a call center or tax practice in your discussion.arrow_forwardInformation technology has made it easier for managers to perform all of the following tasks except a. preparing performance reports that identify variances between actual and budgeted revenues and costs. b. combining individual units’ budgets into the companywide budget. c. sensitivity analyses. d. removing budgetary slack from the budget.arrow_forwardWhich of the following is a limitation of using past performance as a basis for judging actual results? Choose below: 1. It does not account for productivity increases over the periods 2. It assumes inefficiencies of previous periods without considering possible efficiencies of the budget period 3. It increases the tendency of senior managers exaggerating changes in future conditions as opposed to changes in current conditions 4. It increases the incentive for managers to introduce budgetary slackarrow_forward
- Indicate whether the item below is used as key performance indicators for the areas of (A) Financial, (B) Customer, (C) Internal Process, or (D) Learning and Growth performance. Choose the one best choice. Quantity variance on a cost report *(A) Financial(B) Customer(C) Internal Process(D) Learning and Growth performance.arrow_forwardQuestion 4 a.Illustrate and give examples of how variances operate in an organisation and why management must always endeavour to have them determined b.Discuss the significance of both favourable and adverse variances how they assist management in reversing decisions.arrow_forwardA good performance measurement system should have the following characteristics: It should be based on activities over which managers have control or influence. It should be measurable. It should be timely. It should be consistent in its application. When appropriate, the actual results should be compared with the budgeted results, standards, or past performance. The measurements must not favor the manager over the goals of the entire organization. Often, managers have the ability to make decisions that favor their individual units but that may be detrimental to the overall performance of the organization. True / Falsearrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY