Analysis of variance, Cost Accounting

ANALYSIS OF VARIANCE

When the actual are not similar from the standards, variance exists. Variance may be unfavorable or favorable. When the actual cost is more than the standard cost, it is called unfavorable variance. If actual cost is less than the standard cost, the difference is called favorable variance.  Variance analysis is the origin of cost control under standard costing and leads to cost reduction as well as revision of standards. The variance analysis supports to pinpoint responsibilities to the man- agers, who can exercise the method of 'management by exception'.  Variances are mainly divided into two groups,                                                                      

i)  arising out of price and

ii)  arising out of usage or volume.

Posted Date: 10/15/2012 7:19:35 AM | Location : United States







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