Are We Speaking the Same Language?

Business Finance

Pathmark, Incorporated, uses a costing system with standard costs for direct materials, direct labor, and overhead costs. There are two comments frequently mentioned by managers at the company in relation to standard costing and variance analysis: “Variances are not explanations” and “Management’s goal is not to minimize variances.”

Imagine you are a member of a group of these managers discussing the comments at a roundtable training session being held at the company’s annual managers retreat being held in Las Vegas. You have decided to comment on your interpretation of these phrases. Explain your point of view by using the correct terminology and citations.

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