Why do we separate the price (rate) and quantity (efficiency) variances?

Why do we separate the price (rate) and quantity (efficiency) variances?

Expert Solution

Answer

we do separate both the price and quantity variance as both are different factor affecting the variance and we want to exactly know that why variance has arisen is it due to the fluctuations in rates or due to the usage of quantity. Having total variance will not serve any purpose

As main purpose of finding out the variance is to take corrective measures in future to avoid the happening of those factors which has led to the variance especially unfavorable but if will not calculated the price and quantity variance separately so we will not be able to exactly pin point the cause of variance hence valid corrective measures will not be possible. So we should decide that whether variance which is happening is how much due to price fluctuations and how much is due to usage of quantity. As. decisions to be taken for both kind of variances will be different so

Hope this much explanation is sufficient if any more query please mention in comment section

Thank you

ekkarill92 answered 1 year ago

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