REPLY TO THE COMMENT BELOW WITH AT LEAST 250 WORDS CITATION AND REFRENCE Variance is the difference between actual results and budgeted results (Davis & Davis, 2020). It is calculated by subtracti
REPLY TO THE COMMENT BELOW WITH AT LEAST 250 WORDS CITATION AND REFRENCE
Variance is the difference between actual results and budgeted results (Davis & Davis, 2020). It is calculated by subtracting the actual results from the budgeted ones. It must be listed as a favorable or unfavorable amount when reporting to show how the budget is affected. When managers are developing budgets for their companies where consumer products are involved, there can be several unpredictable variances that occur (Bodur & Grohmann, 2014). For example, in the grocery store industry, managers can budget on the products themselves but with marketing and exact sales there is a variance in the products that require more physical touch, like milk or eggs, than those that are non-edible or touched only a couple times such as batteries or light bulbs. There is an ethical variant that can effect consumers’ purchasing. The pandemic has shown that sanitation affects how customers react to purchases. If the facility looks unsanitary or seems to be filled with customers who may be sick, then the variance changes the percentage of customers who may or may not care enough to purchase. Managers must take these and other factors into account that can show unfavorable variances from the budgeted predictions in the past.
This variance can be affected by how bad the customers need the products or is it within their ethical guidelines not to worry about germs and contagions. The quality of the product can usually be predicted with past sales but still depends on other variances that can be unpredicted. When Covid-19 became prevalent shipping services were halted, workers were laid off because of shortages or sicknesses, and even government mandates stopped the flow of products. These variances were very unfavorable and delays in almost every department of the country made budgets very unstable.
Bodur, H., Gao, T., & Grohmann, B. (2014). The ethical attribute stigma: Understanding when ethical attributes improve consumer responses to product evaluations. Journal of Business Ethics, 122(1), 167–177. https://doi-org.lopes.idm.oclc.org/10.1007/s10551-013-1764-5
Davis C. E., & Davis E. (2020). Managerial Accounting, Enhanced eText (4th ed.). John Wiley & Sons. ISBN-13: 978EEGRP40373