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

Steps of choosing an accounting based performance, Steps of choosing an acc...

Steps of choosing an accounting based performance measure Consider the overall goal of the organization as a whole. It is important to choose a measure of accomplishment that r

Bussiness.., #queThe following information pertains to Fairways Driving Ran...

#queThe following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they

Standard conventions in game theory, Standard conventions in Game Theory ...

Standard conventions in Game Theory Consider the following table as shown below: X plays row I, Y plays Column I, X wins 3 points X plays row I, Y plays Column II, X los

Adjusted profit and loss method, Under this method, approximated profit is ...

Under this method, approximated profit is calculated depends on transactions of the ensuing period. Afterward, decrease or increase in working capital is determined adjusting the e

Determining optimum cash balance, One of the main deities of the financial ...

One of the main deities of the financial manager is to keep a sound liquidity position for the firm hence the dues are settled as and while they mature. Separately from this the fi

Summary journal entries, Stine Company uses a job order cost system. On May...

Stine Company uses a job order cost system. On May 1, the company has a balance in Work in Process Inventory of $3,730 and two jobs in process: Job No. 429 $2,150, and Job No. 430

Product mix decision when capacity constraints exist, a certain company mak...

a certain company makes 3 products A,B and C and they use the same raw material zhong.details about each product is as follows.production units are 10 000 for A,8 000 for B,12 000

Accounting for business enterprise, a)      Calculate  and  discuss  the ...

a)      Calculate  and  discuss  the  nature  and  role  of accounting  for  business enterprise.  b)      Determine and discuss  the desirable qualities  expected from the prep

Relevant costs for non-routine decisions, RELEVANT COSTS FOR NON-ROUTINE DE...

RELEVANT COSTS FOR NON-ROUTINE DECISIONS A relevant cost is a cost that is appropriate to a specific management decision. To be relevant, a cost should be: 1) Future cost

Starbucks project, 1) FUTURE CASH FLOWS: Prepare a three (3) year forecast ...

1) FUTURE CASH FLOWS: Prepare a three (3) year forecast of estimated future cash flows for starbucks and give valid economic/business reasons for your projections. This means you w

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