Question

How do variance reports promote the management by exception doctrine?

Answer 1

Solution. An organization operating in competitive economic market needs to carefully study and analyze its business activities in order to sustain. A business operates to create and deliver value to its customers and, is considered to be what the employees activities are. Employees are given the required authority and management's attention is drawn in this case under relevant anomalies occurrence only, determined, calculated and found in the variance report and facilitates in the process of recognizing management by exception doctrine. Variance report is calculated as the difference between established standard data to actual realized outcome and converted into percentage form.  Management by exception is a managerial tool of determining and analyzing any difference between standard and actual budgeted amount during operating business period which is called variance. Management focuses on these considerably big variances and bridges the gap in order to run the business smoothly. The standard data is planned considering various reports and budgeted calculations in order to meet organizational set objective of maximizing profit and minimizing costs. This process saves on management's time and focus on relevant anomalies and deviations and encompasses process deviation, external deviation, etcetera.