Question

PLEASE NO HANDWRITTEN OR COPIED ANSWERS

Explain what reviewing the history of cost center variances over time will help a company determine.

Answer 1

1. Planning the Budgeting process : Previous year's and current year performance can be analyzed using the history of cost center variance. Helps the company keep the track of the goals and commitments to be on track as planned.

2. Helps companies analyze growth rate.

3. Helps companies change Business Strategy : Variance analysis helps companies analyze current market trends.For example: Market entry of new products such as Kellogs breakfast and diet cokes reduced the market for oily foods showing cutback in sales for traditional food items.

4. Helps track control mechanism on other departments :Minute changes such as increase/decrease in raw materials or perhaps hiring of new workforce can help companies achieve the their milestones.Example : Tracking labour cost variance and material cost variances during a particular period of the year monthly or quarterly can help companies see the need of hiring contractual labor in a particular(seasonal) period of an year.

5. Help companies analyze operational efficiency.

6. It depends on the companies business model which affects them the most such as a service organization (such as a consulting company) might be only concerned with the labor efficiency variance, while a manufacturing company  is concerned with the purchase price variance.

7. Provides actionable insights to companies to evaluate new products,international expansion,mergers and acquisition impact.