Examine the main reasons why manufacturing companies are more sensitive to material price variances, as compared to labor variances, and determine the importance of companies managing these variances in relation to sustaining profitability

How would you define fixed and variable product costs? How are these costs used in determining the contribution margin of different products manufactured and sold? What relationship do you see between these cost behaviors as they relate to the volume of sales/production and profitability?

Ashvin

Which statement is true? A. Gross profit (GP) variance analysis, is an essential part of financial statements analysis that is used to evaluate the performance of a firm's departments responsible for the firm's line activities (functions). B. Increases and decreases in sales and cost of sales have direct relationship with increases and decreases in GP. C. If there is a negative sales price variance and there is no cost variance, the gross profit variance will be equal to the sales price variance. D. A zero cost variance indicates that there is no difference between the standard cost prices and actual cost prices. E. none of the above

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain your response.  What if a company found that they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?

How frequently do you believe that firms should conduct variance analysis? Explain why?

Describe the differences in behavior of fixed costs, variable costs, semi-variable costs and step costs. Then discuss how break-even analysis and contribution margin can be useful in making business decisions.

Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. What are the limitations of using operating leverage to predict profitability?

Indicate whether the items below are used as key performance indicators for the areas Quantity variance on a cost report *(A) Financial(B) Customer(C) Internal Process(D) Learning and Growth performance.

Is it possible for a retail store such as Apple to use variances in analyzing its operating performance? Explain.