Building on the example of XYZ Company in task A.C.2.2 the management will now look for reasons that lead to unfavorable variance. One of the following could be the reason:
- Budget estimates were built on unrealistic assumptions
- In efficiency of the workers and the foremen that resulted in laborers sitting idle or taking unnecessary breaks
- Inefficiency of procurement function in negotiating the hourly rate
The above variance analysis is reflective of a report at the end of a production run of 46 500 concrete blocks. A weekly report can be constructed to act more proactively.
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