Considerations in variance investigation, Cost Accounting

Assignment Help:

Considerations in Variance Investigation

As already notice above, not all variances are investigated; this is only the material and meaningful as for cost control reasons variances that are investigated for further management action. However even as we go into investigating what caused a variance to happen, we need to consider the given factors as:

i. Materiality Management should describe the materiality level that when reached needs to be investigated. Each variance below the materiality level is not investigated.

ii. Sensitivity to Cash Flow: We required considering which variances translate into cash flow implications for example: price variances.  If a variance is extremely highly sensitive to cash flows, then we required to set a low materiality level while if a variance has extremely low sensitivity to cash flow, then we required setting a high materiality level.

iii. Frequency of Occurrence:  A variance that happens consistently or frequently requires to be investigated as early as possible.

iv. Control : we only need to hold managers accountable for the variances that they could control.  Variances caused via factors beyond the manager's control cannot be blamed on the manager, for example: external factors such as the government actions, inflation and unfavourable exchange rates could reasons adverse variances which the managers cannot be held responsible for.

v. Cost-Benefit Analysis:  If the cost of investigating a variance exceeds the benefits of that organization, then there is no requires of investigating the variance like it is a waste of resources. The reverse is correct.

vi. The management Style: In an autocratically managed organization every variances are investigated like actions are not expected to deviate from the stipulated. In a democratically managed organization, merely the material variances would be investigated.


Related Discussions:- Considerations in variance investigation

Sanford charge to expense during 2013, In January, 2008, Sanford Corporatio...

In January, 2008, Sanford Corporation purchased a patent for a new product for $1,200,000. The patent was valid for fifteen years but it was estimated to have a useful life of ten

Product mix, Kaplan Computers manufactures high end computer systems for th...

Kaplan Computers manufactures high end computer systems for the graphics design industry. At the present time, the company makes three computers with the following characteristics

Calculate the amount of interest capitalized for the year, A company constr...

A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $550,000; M

Describe time sheets and job cards, (a) Describe briefly how the following ...

(a) Describe briefly how the following are used in the accounting for labour: (i)   time sheets (ii)   job cards. (b) The following details relate to the labour in a produ

Mamufactuaring account, for the year ended31st dec 2008manufacturing accoun...

for the year ended31st dec 2008manufacturing accountshowing costof row material,manufacturing expenses and the cost of goods manufactured& tradind account where stock of row mater

Principles of incremental revenue and relevant costs, Shortflower Ltd curre...

Shortflower Ltd currently publishes, prints and distributes a range of catalogues and instruction manuals. The management has now decided to discontinue printing and distribution a

Marginal costing, a company wants to buy a new machine to replace on which ...

a company wants to buy a new machine to replace on which is having frequent breakdown.............. .......... c-the models suitable for different levels for demand of product?

Explain with examples and cite were needed, What are the distinguishing cha...

What are the distinguishing characteristics of these types of stock- describe any one of them. What is the difference between par value, book value and market value of stock? Expla

Prepare a forecast of cashflow, A company is to produce an IC and a chip si...

A company is to produce an IC and a chip size of 120mm2 has been estimated, based on using a full-custom nMOS technology on 8" wafers. The process has a 92% yield at the wafer fab

Budgetary planning and budgetary control, Difference between budgetary plan...

Difference between budgetary planning and budgetary control

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd