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To determine cumulative variance for outputs, which formula should be used?

  1. Previous Cumulative Variance + Actual Output - Planned Output

  2. Previous Planned Backlog + Planned Input - Planned Output

  3. Actual Input - Actual Output

  4. Previous Actual Backlog + Planned Input - Planned Output

The correct answer is: Previous Cumulative Variance + Actual Output - Planned Output

The cumulative variance for outputs is assessed using the first option, which takes into account the previous cumulative variance along with the difference between actual output and planned output. This formula allows for an ongoing assessment of performance over time, providing a running total of variances. By summing the previous cumulative variance with the difference between actual and planned outputs, you can effectively track how well actual production aligns with expectations. This is essential in performance management, as it reflects the total impact of variances up to the current point in time. The other options either relate to different concepts, such as backlog management or simply assessing individual variances without incorporating previous periods, resulting in an incomplete analysis for cumulative variance. Option B deals with planned inputs and outputs too generically and does not capture the actual performance picture. Option C only measures a single period's difference without considering past performance, and Option D similarly fails to provide cumulative insights by focusing on planned backlog rather than actual performance results.