As discussed in this chapter companies, when evaluating their business practices, can use managerial accounting concepts to calculate variances as it relates to Direct Materials, Direct Labor and Manufacturing Overhead.

Challenge: Give an example of a Company and a type of variance they would likely calculate and evaluate (as related to this chapter) and provide an explanation of why the variance could occur.

As an example: In the current world environment (i.e. Covid 19) companies are likely using employees to do tasks they do not normally perform. For instance a construction company might be using a light crew to complete a job and be using supervisors to do more work than normal as they are trying to keep crews to a minimum. As such the work is being completed by a worker who is paid more than normal. However in light of restrictions the Company is able to continue operations and maintain revenue streams.

[please note that you do not have to relate the example to Covid-19]