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

Determine the direct materials cost variance, Question P A RT A ...

Question P A RT A Borrico ltd manufacture a single product and they had currently introduced a system of budgeting and variance analysis. The subsequent information i

Sensitivity analysis, Sensitivity Analysis The only certain thing is th...

Sensitivity Analysis The only certain thing is that nothing is sure thing. Cost structures can be anticipated to vary over the time period. Management should vigilantly analyze

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

Reasons for cost allocation, Reasons for Cost Allocation 1. To provide...

Reasons for Cost Allocation 1. To provide comparison along with externally provided services:  It helps in assessing where to continue the contact or service outsiders. 2.

Material costs, Material Costs Material refers to each physical input ...

Material Costs Material refers to each physical input into the production procedure. They involve the giving as: Raw material refers to bought in material that is used

Process costing, If question (CA IPCC) is silent which method to follow: av...

If question (CA IPCC) is silent which method to follow: avg cost or fifo or lifo?

measure the idle time variance, PH plc operates a modern factory that chan...

PH plc operates a modern factory that changes chemicals into fertilizer. Due to the the demand for  its product  is  seasonal,  the  company expects  that  there will be an average

Determine the rate of return, A forecasted increase in metal prices has enc...

A forecasted increase in metal prices has encouraged the ABC Resource Company to consider the expansion of the capacity in one of its mine operations in Northern Ontario. For this

Explain inaccurate financial statemnts, Generally Accepted Accounting Princ...

Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as they prepare and issue financial statemnents. Let's start by getting an understanding of

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