To Determine Whether Variances Are Significant, Managers Set Control Limits

question 29

True/False

To determine whether variances are significant, managers set control limits, which represent the acceptable range, plus or minus an allowable deviation.

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Definitions:

Variable Expenses

Costs that change in proportion to business activity or output levels, such as materials costs and utility expenses directly linked to production.

Fixed Expenses

Fixed expenses are consistent costs that do not vary with the volume of business activity, such as rent or salaries.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenues, indicating the company's profit.

Selling Price

The amount of money charged to the customer for a product or service.