Biology Forums - Study Force

When applied to budgets, responsibility accounting provides feedback to top management about the performance of different responsibility-centre managers relative to the budget. Name and briefly describe the three ways, presented in the textbook, that properly used variances can be helpful.

1.   Early Warning. Variances alert managers early to events neither easily nor immediately evident. Managers can take corrective actions or exploit the available opportunities.
2.   Performance evaluation. Variances inform managers about how well the company has performed in implementing its' strategies.
3.   Evaluating strategy. Variances sometimes signal to managers that their strategies are ineffective.