The most fundamental variance analysis compares:
A) standard material prices with actual material prices.
B) standard direct labor rates with actual direct labor rates.
C) budgeted sales revenue with actual sales revenue.
D) budgeted operating income with actual operating income.

Question

Quizplus · Accepted Answer

The most fundamental variance analysis compares budgeted operating income with actual operating income, as it allows for a comprehensive evaluation of the overall performance of the organization. By comparing the budgeted operating income with the actual operating income, management can identify the reasons behind any deviations and take corrective actions. This analysis also covers all the other variances such as material, labor, and sales revenue variances, making it the most comprehensive and fundamental analysis.

The Most Fundamental Variance Analysis Compares