Solutions to review questions 15.1 A benchmark is a point of reference from which comparisons maybe made. Types of benchmarks include • Financial variables reported in a company’s own accounting system • Financial variables not reported in a company’s own accounting system • Non-financial variables. 15.2 The use that managers can make of variance information should guide the variances to be calculated and analysed. For example, variances that provide substantial insight into why actual results differ from budgeted amounts can often lead to actions promoting continuous improvement in an organisation. 15.3 A Level 2 flexible-budget analysis enables a manager to distinguish how much difference between an actual result and a budgeted amount is due to (a) differences between actual and budgeted output levels and (b) differences between actual and budgeted selling prices, variable costs and fixed costs. 15.4 Effectiveness is the degree to which a predetermined objective or target is met. Efficiency is the relative amount of inputs used to achieve a given level of output. Assume that the objective is to deliver a package to a customer by 10 am. the next day. Effective performance would be making the delivery before 10 am. Efficient performance would be making the delivery using the least amount of resources (time, fuel, etc.