CIMA BA2 Syllabus C. PLANNING AND CONTROL - Interpret Variances - Notes ^{9 / 9}

Interpretation of Variances

Now, we have calculated the variances and want to use them to evaluate someone's performance, however when doing so, we need to consider the following things:

1. Controllable - was the variance controllable or uncontrollable?

2. Uncontrollable - was the variance controllable or uncontrollable? 

   If a variance was due to uncontrollable reasons, for example material prices just increased, well someone's performance should not be judged based on this.

3. Inaccurate standard - An adverse variance could arise because the standard used in the first place was inaccurate and someone's performance should not be based on this.

4. Inaccurate actual results - a variance could arise because our system for recording accurate results is not correct, therefore a manager should not have his performance judged due to this either.