When a large variance is investigated:
A) Only unfavourable variances really matter
B) The standard is certainly wrong and must be corrected
C) An extraordinary event could have occurred
D) Managers are not concerned with quality issues related to the variance

Question

Quizplus · Accepted Answer

A large variance could indicate that an extraordinary event has occurred, such as a one-time expense or a sudden increase in demand. It is important for managers to investigate and understand the cause of the variance in order to make informed decisions and potentially take corrective action. Favourable variances can also be important to identify and replicate in future periods. It is not accurate to say that only unfavourable variances matter or that the standard is always wrong. Quality issues may or may not be related to the variance and should be addressed separately.

When a Large Variance Is Investigated