Making variance analysis more meaningful, Cost Accounting

Assignment Help:

Making Variance Analysis More Meaningful

To compose variance analysis as useful aid to management is the main objective of variance calculations.  However this can only be done whether we investigate the variances and the data utilized to calculate them. Typical questions that could be asked involve:

i. Is there any relationship between the vacancies as example: did we report an unfavourable material usage variance since we reported a favourable material price variance like a result of purchasing low quality materials?

ii. Can further information than merely the variance be provided through the management as to what could have resulted in the variance? As an example: did the budget employ an unrealistic overhead absorption rate leading to capacity and efficiency variances?

iii. Is the variance important and worth reporting? Materiality. This is no point concentrating on extremely small variances. Usually the management sets a significance level of variances as an example: variances are only investigated only whether they beyond 20 percent of the expected value. Hence a variance of between 1 percent and 19 percent would not be investigated.

iv. Are the variances being reported quickly sufficient, to the right people, in enough or too much detail, along with explanatory notes and is follow-up done to ensure about correction of the situations leading to variances happening?


Related Discussions:- Making variance analysis more meaningful

What is the dollar amount of direct material a, Win Corporation sells a sin...

Win Corporation sells a single product. Budgeted sales for the year are anticipated to be 609,725 units, estimated beginning inventory is 107,791 units, and desired ending inventor

Plot janitorial labor cost produced on a scattergraph, The number of workd...

The number of workdays varies from month to month due to the number of weekdays, holidays, days of vacation, and sick leave taken in the month. The number of units produced in a

Create a balance sheet, Igor and Angela were married in 2005, separated in ...

Igor and Angela were married in 2005, separated in 2011, and divorced recently. At the time of marriage, each had some investments and personal assets. They both worked during the

Reserves and surplus, Reserves and surplus or retained earnings usually occ...

Reserves and surplus or retained earnings usually occur out of profitable operations. This is a surplus not distributed through the firm as dividends. Conversely, these are profits

First in first out or fifo method - work in progress, First In First Out or...

First In First Out or FIFO Method - Work in Progress This method considers merely those costs incurred throughout the recent period.  Equivalent units are calculated given a

Standard costing, STANDARD COSTING STANDARD COSTING is a method, which ...

STANDARD COSTING STANDARD COSTING is a method, which uses standards for costs and revenues for the idea of control by variance analysis. It can be used either through operation

Differential costing, explain the practical application of differential cos...

explain the practical application of differential costing with the help of suitable example.

Variable costs, Variable Costs Are costs such raise or fall proportio...

Variable Costs Are costs such raise or fall proportionately along with the level of activity that is such portion of the cost of an activity which changes along with the leve

Compute the internal rate of return, ABC bond is a 20-year bond with face v...

ABC bond is a 20-year bond with face value $1000. The coupon payment is $25 per 6 months. The semi-annual yield is 4%. Use the PV function in Excel (or equivalent) to Önd the price

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