A Company Has a Policy "Investigate All Variances Exceeding $3,000

question 181

Multiple Choice

A company has a policy "investigate all variances exceeding $3,000 or 15% of the budgeted cost, whichever is lower." There is a variance of $2,000 in repair and maintenance costs of $12,000. What does the company do in the given situation?

• A) It should be ignored as it is less than $3,000.
• B) It deserves more attention as it is more than 15% of total repair cost.
• C) It should be considered an in-control occurrence.
• D) It should be investigated as all variances are equally important.

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