What Is the Most Viable Rule of Thumb for Choosing

question 89

Multiple Choice

What is the most viable rule of thumb for choosing variances that should be investigated?

• A) Greater than $10 000 or greater than 10 per cent of standard cost
• B) Greater than 50 per cent of standard
• C) Never investigate favourable variances
• D) Always investigate unfavourable variances

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Definitions:

Efficient Scale

The level of production at which a company or industry can produce its products at the lowest average cost, optimizing resource use.

Identical Costs

Costs that are the same in amount or value, often referring to uniform expenses across different units or operations.

Average Total Cost

The total cost of production divided by the quantity produced, representing the average cost of producing each unit of output.

Competitive Market

A market structure characterized by a large number of sellers and buyers, where no single entity can significantly influence prices, leading to optimal product pricing and variety.