Analyzing and Managing Variances in Business Operations

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AnalyzingandManagingVariancesinBusinessOperationsWeek4DQ2Whenshouldvariancesbeinvestigated?Eachcompanyisdifferent;theywilleachhavetheirownstandardsastowhenvariancesshouldbeinvestigated.Answer:Variancesshouldbeinvestigatedwhentheyexceedpre-establishedthresholdsorwhentheysignificantlyimpactfinancialperformance.Thespecifictimingdependsonthecompany’spoliciesandthematerialityofthevariance.Whoshouldberesponsibleforcorrectinganegativevariance?Why?Negativevariancesarealsoknownasunfavorablevariances.Astowhoisresponsibleforcorrectingtheunfavorablevariancedependsonwherethevarianceoccurred.Theresponsiblepartycouldbeadepartmentoranindividuallikeamanager.Ifthevarianceoccurredwithoverheadthentheproductiondepartmentwouldberesponsibletocorrectit.Answer:Theresponsiblepartyforcorrectinganegativevariancedependsonwhereitoccurred.Forexample,ifthevarianceisrelatedtooverhead,theproductiondepartmentwouldtypicallyberesponsibleforcorrectingit.

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