Troy Company budgeted $12 million for customer service costs, but actually spent only $10 million. Which of the following statements is the best course of action for management to take in this instance?
A)Management will investigate this $2 million favorable variance to ensure that the cost savings do not reflect skimping on customer service.
B)Because this $2 million variance is favorable, management does not need to investigate further.
C)Management will investigate this $2 million unfavorable variance to try to identify and correct the problem.
D)Management should not investigate every major variance, especially an unfavorable variance.

Question

Quizplus · Accepted Answer

While the variance is favorable, it is still a significant difference from the budgeted amount. Management should investigate to ensure that the cost savings were not achieved by sacrificing customer service quality.

Troy Company Budgeted $12 Million for Customer Service Costs, but Actually