Which variance is particularly meaningful for cost control?

Which variance is particularly meaningful for cost control?

• A. Volume variance.
• B. Expenditure variance.
• C. Sales variance.
• D. Calendar variance.

Answer: (B)

This question is about how to measure cost control with variances. Expenditure variance is the difference between what was actually spent and what was budgeted to be spent for the period. It directly shows whether costs were kept under or overspent, regardless of how much was produced or sold. If actual costs exceed the budget, the variance is adverse and points to issues like higher prices, waste, or inefficiency; if actual costs are lower, it’s favourable and indicates tighter cost control. Other variances relate to how much was produced (volume), when costs were incurred (calendar), or revenue effects (sales), which can complicate interpretation of cost control, but the expenditure variance isolates spending performance.

This question is about how to measure cost control with variances. Expenditure variance is the difference between what was actually spent and what was budgeted to be spent for the period. It directly shows whether costs were kept under or overspent, regardless of how much was produced or sold. If actual costs exceed the budget, the variance is adverse and points to issues like higher prices, waste, or inefficiency; if actual costs are lower, it’s favourable and indicates tighter cost control. Other variances relate to how much was produced (volume), when costs were incurred (calendar), or revenue effects (sales), which can complicate interpretation of cost control, but the expenditure variance isolates spending performance.