# A company has a policy - "investigate all variances exceeding $3,000 or 15% of the budgeted... ## Question: A company has a policy - "investigate all variances exceeding$3,000 or 15% of the budgeted cost."

There is a variance of $2,000 in repair and maintenance costs of$12,000. What does the company do in the given situation?

a) It should be ignored as it is less than $3,000. b) It should be investigated as all variances are equally important. c) It deserves more attention as it is more than 15% of the total repair cost. d) It should be considered an in-control occurrence. ## Variances in Budgets: Variances in budgets are the differences between the actual results and the expected results according to the budget. Management should decide on a policy of how to react to variances. ## Answer and Explanation: 1 Become a Study.com member to unlock this answer! Let us consider the alternatives:  a) It should be ignored as it is less than$3,000. No, while it is less than \$3,000, it is more than 15% of the...

Variances in Budgets: Definition, Calculations & Analysis

from

Chapter 9 / Lesson 16
8.4K

Calculating variances is one component of budgeting and accounting in business. Understand the definition of variances in budgets, and examine how variances are calculated and analyzed.