When a company is using standard costs, favorable variances are good news, and so the reasons for them do not need to be explained or investigated.

Question

Quizplus · Accepted Answer

Even though favorable variances may be good news, it is still important to investigate and understand the reasons behind them. This can help identify areas for improvement and ensure that the standard costs are accurate and realistic. Ignoring or not investigating favorable variances can lead to complacency and missed opportunities for cost savings and operational efficiencies.

When a Company Is Using Standard Costs, Favorable Variances Are