Question

Discuss your understanding of how Overhead and Marketing Variances affect the decision making process in a manufacturing environment.

Answer 1

One of the important concepts that play a major role in decision making process in a manufacturing environment is cost involved. The Overhead variance is the difference between the actual amount of money spent on overhead expenses and the budgeted overhead expenses. This difference is going to have a significant impact on the total cost. Similarly, Marketing variance is the analysis or the study to understand the reason for not being able to achieve the goal of marketing plan. Each company has a marketing plan which is broken down into smaller marketing objectives. The achievement of these objectives can be understood by the marketing analysis. This is also an important element of decision making process in a manufacturing environment. It will have an effect on the budget and the way in which the financial resources of the firm are allocated. If the variance is too high then the company will have to plan its budget in a better manner for the next time. There will be the requirement for implementing a better control measure. If the variance is less then it implies that the decision taken is good and the company can go ahead with it. The marketing variance is important as the company will earn profits only by sale of the manufactured product through marketing activities.