The Watch and Timepiece Division of Geraldo Jewelers had significant problems in 2012.Sales and production were down
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Surprisingly, actual costs were less than budgeted, indicating favorable variances.
Timothy was upbeat when told that the president had scheduled a meeting with him to discuss the Watch and Timepiece Division’s performance. Although sales were down, at least he could point to a large number of favorable cost variances.
Required
Briefly explain why the variances are positive, and discuss what John should know about flexible budgets. Assuming that the president understands flexible budgets; will the president be impressed by the favorable cost variances?
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