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The types or variances computed depend on the responsibility centers and the level of management for which the review is performed. Since the objective is to determine the degree of corrective action needed, the variances computed must relate to key performance indicators considered critical to the success of the responsibility center. The primary objective of cost variance analysis is to permit organizational managers to detect and correct inefficiencies wherever they exist in operations involving expenditures. Decisions are generally necessary as to what kinds of variances to compute whether or not to investigate and whether or not to investigate a particular variance once computed...
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