An exception is an event that deviates from expectations. Exceptions are typically spotted when comparing actual results to a budget or standard. If the exception is sufficiently large, it is included in a variance report that is issued to management for further action. This type of reporting system is known as management by exception. Examples of exceptions are:

  • Excessive overtime

  • A large amount of material scrap

  • Too many hours being charged to a project

  • Excessive amounts of travel expenses charged to a client

Related Courses

Cost Accounting Fundamentals 
Cost Management Guidebook