Which data would you need to compute Variance?

Which data would you need to compute Variance?

• A. Actual Usage and Theoretical Usage
• B. Usage and Net Sales
• C. Beginning Inventory and Ending Inventory
• D. Transfers In and Transfers Out

Answer: (A)

Variance tells you how far actual results deviate from what was planned. To compute it, you need what actually happened (Actual Usage) and what was expected to happen (Theoretical or Standard Usage). Subtract the theoretical usage from the actual usage (the sign shows favorable or unfavorable). For example, if you actually used 230 units of an ingredient but the standard usage for the production level was 200 units, the variance is 30 units unfavorable. Other data like Usage paired with Net Sales mixes consumption with revenue and doesn’t measure adherence to the planned usage. Beginning and Ending Inventory reflect stock levels over time, not the gap between actual and planned usage. Transfers In and Transfers Out track movement between locations, not how much was consumed versus what was expected.

Variance tells you how far actual results deviate from what was planned. To compute it, you need what actually happened (Actual Usage) and what was expected to happen (Theoretical or Standard Usage). Subtract the theoretical usage from the actual usage (the sign shows favorable or unfavorable). For example, if you actually used 230 units of an ingredient but the standard usage for the production level was 200 units, the variance is 30 units unfavorable.

Other data like Usage paired with Net Sales mixes consumption with revenue and doesn’t measure adherence to the planned usage. Beginning and Ending Inventory reflect stock levels over time, not the gap between actual and planned usage. Transfers In and Transfers Out track movement between locations, not how much was consumed versus what was expected.