When a Company Is Using Standard Costs, a Favorable Variance

question 120

True/False

When a company is using standard costs, a favorable variance is a definite indication that a manager is doing a good job.

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Definitions:

ABC Implementation

The process of applying Activity-Based Costing, an accounting method that assigns costs to activities based on their use of resources.

Uncertainty

A condition characterized by a lack of sufficient knowledge, making it difficult to precisely identify the current situation, predict future events, or acknowledge multiple potential outcomes.

Outdated Costing System

A costing system that no longer accurately reflects the current production operations or costs, leading to misinformed pricing or investment decisions.

Profit Margins

The percentage of revenue that remains as profit after all expenses have been deducted from sales.