Which question can be answered by looking at trends in cost variances?

Which question can be answered by looking at trends in cost variances?

• A. What is the overall variance magnitude?
• B. Do variances exhibit systematic differences, or are they random?
• C. Are variances favorable or unfavorable?
• D. Which department caused the variance?

Answer: (B)

Looking at cost variances over time reveals whether the deviations from standard costs follow a repeatable pattern or occur more randomly. If the variances move in a consistent direction or show a regular pattern across periods, that points to a systematic variance caused by recurring factors like ongoing cost drivers or price changes. If the variances jump around without a discernible pattern, they’re more likely random, stemming from irregular, short-term events. So trends help you determine if variances are systematic or random. The other questions focus on how big the variance is, whether it’s favorable or unfavorable, or which department is involved, which don’t rely on patterns over time.

Looking at cost variances over time reveals whether the deviations from standard costs follow a repeatable pattern or occur more randomly. If the variances move in a consistent direction or show a regular pattern across periods, that points to a systematic variance caused by recurring factors like ongoing cost drivers or price changes. If the variances jump around without a discernible pattern, they’re more likely random, stemming from irregular, short-term events. So trends help you determine if variances are systematic or random. The other questions focus on how big the variance is, whether it’s favorable or unfavorable, or which department is involved, which don’t rely on patterns over time.