When analyzing a variance, what should be assessed before deciding on corrective action?

When analyzing a variance, what should be assessed before deciding on corrective action?

• A. Controllability of the variance.
• B. Whether the variance is favorable or unfavorable only.
• C. The color of the variance report.
• D. The time of year the variance occurred.

Answer: (A)

Controllability of the variance is the key consideration when deciding on corrective action. Before acting, ask whether the cause lies within management’s control. If the variance is due to controllable factors—such as inefficiencies, waste, or incorrect input usage—you can investigate the root causes, change processes, and take steps to bring performance back to the standard. If the variance is outside your control—like a change in market prices, supplier conditions, or demand—there may be little you can do with operational changes, so the appropriate response is often to adjust plans or forecasts rather than force corrective actions on operations. The color of the variance report or the time of year it occurred isn’t what drives the action; and simply knowing whether a variance is favorable or unfavorable doesn’t tell you if corrective steps should be taken. The important question is whether management can influence the variance.

Controllability of the variance is the key consideration when deciding on corrective action. Before acting, ask whether the cause lies within management’s control. If the variance is due to controllable factors—such as inefficiencies, waste, or incorrect input usage—you can investigate the root causes, change processes, and take steps to bring performance back to the standard. If the variance is outside your control—like a change in market prices, supplier conditions, or demand—there may be little you can do with operational changes, so the appropriate response is often to adjust plans or forecasts rather than force corrective actions on operations. The color of the variance report or the time of year it occurred isn’t what drives the action; and simply knowing whether a variance is favorable or unfavorable doesn’t tell you if corrective steps should be taken. The important question is whether management can influence the variance.