Which of the following is true of variance?
A) Managers should interpret a favorable variance as "good news" or assume it means their subordinates performed well.
B) A variance within an acceptable range is considered to be an "in-control occurrence" and calls for no investigation or action by managers.
C) The purchasing manager secured a discount for buying in bulk with fewer purchase orders which results in unfavorable material price variance.
D) Managers' performance must be evaluated solely on single variance.

Question

Quizplus · Accepted Answer

A variance within an acceptable range is considered to be an "in-control occurrence" and does not require any investigation or action by managers. The other options are not true. Managers should not always interpret favorable variance as "good news" or associate it with their subordinates' performance. Securing a discount for buying in bulk with fewer purchase orders results in a favorable material price variance, not an unfavorable one. Lastly, evaluating managers' performance based on a single variance is too limited and not recommended.

Which of the Following Is True of Variance