ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting
A cost centre manager receives a monthly report showing budget, actual and variance for each cost line. Which feature would most improve its usefulness for management by exception?
Highlighting only variances beyond a set tolerance best supports management by exception, because managers can concentrate on significant deviations from budget instead of reviewing every line or a single combined total.
- AHighlighting only variances that exceed a pre-set tolerance levelCorrect
- BListing all transactions for the month in detail
- CRemoving the budget column to avoid comparison
- DCombining all cost lines into one total figure
Explanation
Management by exception focuses attention on significant deviations, so flagging variances beyond a tolerance does this. Detailed listings bury key items, removing the budget removes the comparison, and a single total hides where problems arise.
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