In a standard cost system we use standardized formulas to compute variances that are usually decomposed into different types. Such as, let us consider from our reading that a sales variance may be decomposed into a sales volume variance, a sales prices variance, and a sales mix variance. >A standard cost quantity variance may occur because we used more or less quantity of a cost input than our standard allows, to make one unit of product. >A standard cost price variance may occur because we spent more or less to buy one unit of a cost input. And, variances are typically reported to management as F and U without + and - signs but instead as absolute values, which means F favorable and U unfavorable both reported as positive amounts, but with a letter, such as F $1,500 or U 12,461. QUESTIONS 1. It seems in Amie's scenario if the material that purchasing bought is below quality standards and has flaws, that we may or may not see a material quantity variance where we are using more or less material than our standard allows to make one unit of finished goods inventory to sell to our customers. Yes/No? Explain 2. Should management investigate only U unfavorable variances or F favorable ones too? Why so or not? 3. Can the causes of variances be accountable to a specific manager? Think about which managers are in charge of purchasing, inventory management, production, and so forth. Why do we want to know who the manager is--to know who to blame, or instead for one or more good business reasons? Explain please. 4. Would you be concerned about whether the variance was a one-time event or will continue for some months in the future? Could this affect your forecasts of future costs and profits for the month, quarter, year? How so or not?

references: