One Reason Complex Models Have Not Found Widespread Use and Application

question 40

Multiple Choice

One reason complex models have not found widespread use and application is that

• A) managers are lazy
• B) managers cannot understand how they work
• C) the models are inaccurate
• D) good models are time-consuming and managers must often react swiftly to dynamic demand
• E) the statement is false; complex models are widely used and accepted

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead costs, based on efficient use of resources.

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the expected (or standard) wage rate, multiplied by the total hours worked.

Variable Overhead Rate Variance

Variable overhead rate variance is the difference between the actual variable overhead costs incurred and the expected (standard) costs, influenced by fluctuations in production activity levels.

Materials Price Variance

The difference between the actual cost of materials and the standard (or expected) cost, indicating how much more or less was spent on materials than was planned.