![]() Low variance is associated with lower risk and a lower return. Every variance that isn’t zero is a positive number. ![]() A variance value of zero, though, indicates that all values within a set of numbers are identical. A small variance, on the other hand, indicates the opposite. How do you interpret a variance?Ī large variance indicates that numbers in the set are far from the mean and far from each other. However, not all variances are important. ![]() When standards are compared to actual performance numbers, the difference is what we call a “variance.” Variances are computed for both the price and quantity of materials, labor, and variable overhead, and are reported to management. Management uses these variances are used to analyze and track the progress of production processes, budgets, and other operations. Definition: A cost variance is the difference between the actual expenses incurred and the standard expenses estimated at the beginning of a period.
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