Interpratation of variance, Managerial Accounting

Assignment Help:

INTERPRATATION OF VARIANCE

Controllability, Materiality and Trend are the interpretation of variance. The point of comparing flexed budget and real figures is to see what corrective action, if any, is required to make sure that the plan will be effectively completed. Therefore every variance requires to be considered to see whether it must prompt control action.
Three significant points must be kept in mind:

Materiality:
Small variations in a single period are bound to take place occasionally and are unlikely to be important. Acquiring an elucidation is likely to be time consuming and frustrating for the manager anxious. The elucidation will frequently be ‘chance’, that is not helpful in any situation. For such variations further investigation is not valuable;

Trend:
Though, small variations which occur consistently may require more attention. Variance trend is more significant than a single set of variances for one accounting period. Trend analysis gives information which gives a sign as to whether a variance is fluctuating in acceptable control limits or is moving into an out of control situation’.


Related Discussions:- Interpratation of variance

The basic eoq model-the deterministic models, THE BASIC EOQ MODEL This ...

THE BASIC EOQ MODEL This is the most simple of all the models discussed. In addition to the general assumptions which relate to all deterministic models (i.e. certainty of all

Transfer pricing, Transfer pricing sometimes entails using different transf...

Transfer pricing sometimes entails using different transfer pricing systems: one for tax purposes, and one for internal decision making, even though maintaining two systems can be

Illustrate thedifference between a fixed and flexible budget, Difference be...

Difference between a fixed and flexible budget Fixed budget A fixed budget remains the same irrespective of changed situations. It remains inflexible even if volume of

Temporary closure of factory or department, TEMPORARY CLOSURE OF FACTORY OR...

TEMPORARY CLOSURE OF FACTORY OR DEPARTMENT Here there is a similar situation to that of discontinuance of a product such as Model N40. A factory which is expected to earn some

Classification of costs, discuss which of the cost classification is suitab...

discuss which of the cost classification is suitable for LunchBreak LTD and why?

Innovations of management accounting and control, Implementing management a...

Implementing management accounting and control innovations are often problematic. Provide a brief commentary around the key factors necessary to give such innovations the best chan

Conditions necessary in a control cycle, Conditions necessary in a control ...

Conditions necessary in a control cycle There are four necessary conditions that must be satisfied before any system can be said to be controlled. Such are as follows: (1) O

MOH Cost Help, During the year the company worked a total of 145,900 machin...

During the year the company worked a total of 145,900 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,305,346. What is the amount of underapplied o

MAKE OR BUY DECISIONS , MAKE OR BUY DECISIONS (NO LIMITING FACTORS) The...

MAKE OR BUY DECISIONS (NO LIMITING FACTORS) The choice between making and buying a given component is one which is likely to face all businesses at some time.  It is often one

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