Question

Why is the efficiency variance more useful for contro purposes than the price variance ? 100...

Why is the efficiency variance more useful for contro purposes than the price variance ? 100 words

Homework Answers

Answer #1

This is because prices are mainly dependent on external market forces that determines the price of various factors on which management cannot have much control. On the other hand, efficiency variance are more related to internal processes like efficiency of production prpcesses, reduction of wastage, time taken to produce per unit etc. which can be controlled or improved by the management.

In other words, managers have more control over inputs than prices and hence efficiency variance is more useful for control purposes than the price variance.

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