What are the Resons to use Variance analysis
Variance analysis should be a continuous process for following reasons:
1) Labor rates, salary levels etc, changes due to union negotiations, policy decisions or changes in composition of the work force.
2) Selling price change.
3) In a multi product company product mix changes and different line have different margins; the overall profit position will change.
4) Improvement in systems can bring about reduction in costs.
5) Change in level of efforts of operators, supervisors, management and clerical staff.
6) Investment in new capital equipment and scrapping of old equipment/processes/methods.
7) The prices of bought out material.
8) Changes in product design to change cost inputs.
9) Policy decisions of various kinds for example changes in organizational structure.
10) The amount of idle time may change due to holdups strikes lockouts and power failure.