Discuss CIPS L6M9 Exam Topic 1 Question 21

Andrea is the Chief Financial Officer at Big Corporation and is completing a Variance Analysis. She has reviewed the production costs of creating item B, and this month's costs show a variance to budget of -200. What does this mean?

AMore money was spent than expected

BLess money was spent than expected

CThe organisation has lost 200

DThe organisation has gained 200

Suggested Answer: B

A negative variance to budget means that the company spent 200 less than expected, which is a positive outcome. While it may seem counterintuitive, a negative variance in this context indicates cost savings rather than overspending. Option D is incorrect because the organisation has saved 200, not gained it. (See p.198)

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20 comments · newest first

Sanjuana 2 months ago

But what if it means they gained? I lean towards D.

Tuyet 2 months ago

I agree with A. The budget was exceeded.

Elke 2 months ago

No, it's about spending. So, A is correct.

Cheryl 3 months ago

I feel confused. Can it also mean a loss?

Mignon 3 months ago

Definitely A. A negative variance usually indicates overspending.

Willard 3 months ago

I think it means more money was spent than expected.

Mattie 3 months ago

Yup, A is the right answer! Always keep an eye on those variances.

Sommer 3 months ago

-200 sounds bad, but is it really that serious?

Evangelina 4 months ago

Wait, how can they lose 200? I thought it was a gain?

Kristine 4 months ago

Definitely A! Can't believe some people get this wrong.

Kallie 4 months ago

That's a negative variance, so more money was spent than expected.

Wava 4 months ago

I agree, A makes the most sense here.

Laurena 4 months ago

I thought variances were always good news, this sounds bad.

Noah 4 months ago

Wait, how can they lose 200 if it's just a variance?

Cherilyn 6 months ago

Definitely means they spent more than planned.

Leatha 6 months ago

That's a negative variance, so A is correct.

Vince 7 months ago

I feel like I’ve seen this before in class, and I think a negative variance usually means less money spent, so I might go with B.

Jamal 7 months ago

I’m a bit confused because -200 could also imply savings, but I think it’s more about spending more than expected, so maybe A or C?

Tawna 7 months ago

I remember practicing a similar question where a negative variance indicated overspending, but I’m not completely sure if that applies here too.

Denise 7 months ago

I think a negative variance means that costs were higher than budgeted, so I’m leaning towards option A.

CIPS L6M9 Exam - Topic 1 Question 21 Discussion