Question

There are several reasons why actual results differ from standards. Which of the following does not represent a reason why a variance might occur?

A. Standards which do not reflect the current economic conditions.
B. Event or transaction that is unexpected and infrequent.
C. Increasing the accuracy of a variance report by decreasing its timeliness.
D. Operating conditions that are consistently inefficient.
E. Inaccurate information from the accounting system.

Answer 1

Option C, which suggests increasing the accuracy of a variance report by decreasing its timeliness, does not cause a variance. This option is a trade-off in report creation, not a cause for differing results.

Step-by-step explanation:

When considering reasons why actual results might differ from standards or expectations, such as in variance analysis, several factors can be the cause. These include:

• Standards not reflecting current economic conditions.
• Unexpected and infrequent events or transactions.
• Inefficiencies in operating conditions.
• Inaccuracies in the accounting system.

Option C, increasing the accuracy of a variance report by decreasing its timeliness, does not represent a reason for a variance to occur. Instead, it reflects a methodological choice regarding the trade-off between accuracy and timeliness when reporting data. Higher accuracy might be achieved with more time, thereby reducing timeliness, but this in itself is not a cause of variance.