What is scientific standards and variance analysis, Managerial Accounting

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What is  Scientific standards and Variance analysis

The important steps of standard costing as described above may be summarized as follows;

1) Scientific standards: standard for each element of manufacturing cost-material, labor and overhead-are scientifically established. They act as bench-marks for performance.

2) Cost comparison: standard costs and actual costs are collected and compared to ascertain variances.

3) Variance analysis: variances are properly analyzed and explained. Significant variances are reported to top management.

4) Corrective actions: Corrective actions are taken to ensure that future performance will be in accordance with standards.

 


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