Which of the following statements regarding the use of profit variance analysis in service and merchandise organizations is not correct?

Multiple Choice

• There is an assumed substitutability of inputs when considering direct labor mix variances.

• One of the factors that is important when considering direct labor mix variances is the input costs must be different for a mix variance to exist.

• Computing nonmanufacturing efficiency variances requires some assumed relationship between input and output activity.

• All of these are correct statements.

• Merchandising and service organizations focus on marketing and administrative costs to measure efficiency and control costs.