Reference no: EM132655230

Shared Practice: Variance Analysis

Several tools are available to managers when evaluating organizational performance. Variance analysis is one such tool used to evaluate performance. Variance analysis compares actual costs with standard costs. The results from a variance analysis are important for helping managers control costs as well as identify areas were organizational performance and efficiency can be improved.

To prepare for this Discussion: Shared Practice, review the Learning Resources for this week and reflect on how actual costs, standard costs, and variance analysis will contribute to your current or future role as a manager or in decision making. Consider the role of variances when engaged in decision making and how variance analysis might help contribute to improved organizational efficiency.

1. Describe a scenario in which there are both highly favorable and highly unfavorable variances. Be sure to include the actual and standard costs in your scenario.

2. Analyze how and why you, as a manager, would prioritize the variances for analysis and how knowing these variances might help you improve efficiency.

Assignment: Calculating Variances and Analyzing the Results

While many organizational costs can be planned for, the actual results may vary from the initial projections. Assessing how these variances impact the bottom line is an essential task of many managers.

For this Assignment, review the information in the scenario posted in the entry titled Week 5 Assignment located in the Doc Sharing link. You will utilize the information in this week's Resources and your course text to consider how variance analysis and the results obtained from conducting such an analysis might impact decision making. There is also an Excel template provided in the same entry in the Doc Sharing link that you may find helpful in completing this Assignment.

Part 1: Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.

Part 2: Prepare a memo to your subordinate, using a program like Word.

- Summarize and analyze the actual costs in relation to the standard costs incurred for the month.

- Ask for clarification of any variances that need to be investigated.

Be sure to include whether alternatives exist for the future of the organization and explain how the results of the variance analysis might influence those alternatives.