ICAEW BIP · Chapter 9 · Question 13 of 13
Which of the following is a factor in deciding whether a variance should be investigated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Whether the expected benefit of investigating is greater than the cost of investigating
Explanation
Factors include the size (materiality) of the variance, whether it is controllable, any trend over several periods, the reliability of the standard and whether the benefit of investigating outweighs the cost. Favourable variances can also need investigating, for example if they come from an unrealistic standard or from cutting quality.
More Standard costing and variance analysis MCQs
- Q2A company bought 8,400 kg of material for £36,960. The standard price is £4.50 per kg. What is the material price variance?
- Q3Output for the period was 2,000 units. The standard usage is 4 kg per unit at a standard price of £4.50 per kg. Actual usage was 8,400 kg…
- Q4Employees were paid for 5,200 hours at a total cost of £85,280. The standard rate is £16 per hour. What is the labour rate variance?
- Q5Employees were paid for 5,200 hours but worked only 4,900 hours because of a machine breakdown. Output was 1,500 units, and the standard…
- Q6Variable production overheads are absorbed at a standard rate of £5 per labour hour worked. In the period, 4,900 labour hours were worked…