The variances calculated in this chapter are not appropriate for every organization. Industries and/or individual companies must often develop and use variances that make the most sense for evaluating performance for their specific circumstances. The construction industry is one example.

Required:

1. Go to http://www.constructionequipment.com/article/CA6568297.html and read the article that explains how budget variances can be used in the construction industry.

2. Explain how and why construction equipment costs are separated into owning costs and operating costs.

3. If you were a manager for this company, how would you interpret and evaluate the company’s performance for each class of equipment?

4. Does this manner of evaluation make sense for a construction company? Why or why not?

5. Give examples of two other companies or industries that would use different variances than those calculated in this chapter.