Problem
1. Explain, using two appropriate examples, how variable costs can differ from direct costs. Your examples should both help to clearly illustrate this difference.
2. Using the example of someone considering giving up an existing job to start a new business, explain the concept of opportunity cost. Your example should quantify the relevant opportunity cost in terms of both investing existing savings as well as giving up an existing job.
3. Briefly describe how variances can be used to improve planning and budgeting in an organization.
4. Explain, using an appropriate example, what is meant by 'management by exception'.