Question

Think of a business in the Service Industry: hotels, restaurants, personal services like hair dressers, accountants, lawyers, landscapers, contractors, etc.

Describe the Service Business you are thinking of.

Could they use variance analysis?

In what way could they use the techniques of Variance analysis?

What management advantage would they get from any analysis?

if you feel they could not benefit from variance analysis - explain why you feel that way.

Answer 1

-I have thought of a fast food restaurant which serves made to order dishes.

-They could use variance analysis as standard cost cards will be prepared for all dishes prepared. Variance analysis is the comparison of actual and standard cost.

- The techniques of variance analysis could be used to find out excessive cost or any cost saving i.e. adverse or favorable variance. The results can be used to evaluate performance efficiency.

-Management can find out the profitable and non profitable products by performimg the variance analysis.

-They will benefit from the variance analysis as it is a useful tool.