Significance points of variance, Managerial Accounting

Significance points of Variance

The following significant points must be kept in mind:

Controllability:  

Controllability should also influence the decision whether to examine further. When there is a common worldwide price raise in the price of a significant raw material there is nothing that can be done internally to control the consequence of this. When a central decision is made to award all employees a 10% raise in salary, staff costs in a division will rise by this amount and the variance is not controllable by a division’s manager. Uncontrollable variances call for a change in the plan, not an examination into the past.

Variance trend:

When, say, an efficiency variance is Sh.1,000 adverse in month 1, the apparent conclusion is that the procedure is out of control and that corrective action should be taken. This might be correct, though what if the same variance is Sh.1,000 adverse every month? The trend points out that the procedure is in control and the standard has been wrongly set.

Assume, though, that the same variance is constantly Sh.1,000 adverse for each of the first six months of the year though that production has gradually fallen from 100 units in month 1 to 65 units by month six. The variance trend in absolute terms is steady, though associative to the number of units produced, effectiveness has got gradually worse.

Posted Date: 12/8/2012 2:40:40 AM | Location : United States







Related Discussions:- Significance points of variance, Assignment Help, Ask Question on Significance points of variance, Get Answer, Expert's Help, Significance points of variance Discussions

Write discussion on Significance points of variance
Your posts are moderated
Related Questions
A managerial accounting strategy focusing mainly on maintaining efficient levels of both components of working capital that is current assets and current liabilities, with respect

Choose the relationship which best predicts the dependent variable After exploring a diversity of relationships, you should select the one that can best be employed in predicti

What are the duties of the Public Company Accounting Oversight Board?

depreciation,depletion and amortisation

State Budgetary Control A budget is a quantitative expression of a plan of action relating to the forthcoming budget period. It represents a written operational plan of managem

Your financial advisor has recommended that you invest into your Roth Individual Retirement Account (Roth IRA) the sum of $5,000. If you put in $5,000 today, what will this investm


Advantages of Imposed budgets Advantages: They increase the probability that the organization strategic plans are incorporated into the planned activities. They

Himalaya Ltd.'s Profit and Loss Account for the year ended on 31st December 2005 is specified below. You are needed to determine the working capital needs under operating cycle met

accounting process or accounting cycle