Question

Variance analysis can spotlight positive performance and can be used to reward superior performance by employees. True False

Answer 1

True

Variance Analysis is a concept of Cost Accounting, which deals with the variance of deviation of actual performance from the standards set ot established earlier. Standards are set on the basis of historical data and market conditions. Standards set the ideal material, labour and other factors of production required to complete a given activity/task.

Deviation of actual performance from standards can be favourable or adverse. While correction action is initiated in case of adverse variances, favourable variances are used to reward superior performance of employees.

Hance, this statement is correct.