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Solution-The difference or the comparison between the actual and standard performance is called variance.Moreover the variance shows the deviation of actual and standard outcomes. Variance analysis is veryhelpful for the company to know about their cost structure. Variance analysis helps the management ofcompany in checking the various areas where performance is above and below the companyexpectations. Price variance is linked to purchase department employees and they have no connectionto efficiency variance while efficiency variance is attributable to operations and they have no connectionto price variance. This variance enables the performance assessment against the benchmark standardsas adopted by the organization. Favorable variance means employees have performed good whileadverse variance means employees has performed below expectations.The investigation of price and volume is very critical for the company when rewards are giving toemployees for their satisfactory work. If the price rate variance is not favorable then the individual whohas been given the authority of buying the material can be held responsible and if it is favorable thenthe reward can be given to that individual. Moreover, if the volume variance is shows the favorablefigure then it shows the efficiency has been achieve due to the good performance of the employee andif the volume variance is not favorable then the individual supervisor should be responsible for the poorperformance of the employee. Qualitative performance analysis focuses on the quality of job performance of employee that thesupervisor able to observe but not measured, like teamwork. The Qualitative performance analysis playsa vital role for making the performance analysis more effective. The Qualitative performance analysis ismore important because that will not impacted the variance but have a bearing on overall profitabilityof the firm.
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