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Is it true that all variances are interrelated to each other which means that one variance could be favourable while the impact on another could be adverse.
Material price will have an impact on material usage variance and vice verse. In the same way, the other variances would also affect their another variance such as :
Labour rate will impact Labour Efficiency;
Variable OH Expenditure will impact Variable OH Efficiency;
Fixed OH Expenditure will impact Fixed OH Volume;Am I right?
Most variances can be inter-related, but they do not have to be.
Certainly the labour rate variance might well impact the labour efficiency variance (but does not have to). If it impacts the labour efficiency variance then it will automatically impact the variable overhead efficiency variance.
There is no reason at all why the variable overhead expense variance should impact the variable overhead efficiency variance, and there is no reason at all why the fixed overhead expenditure variance would impact the volume variance (they are two completely separate things).
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