L- 24 Variance Analysis2

  • November 2019
  • PDF

This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA


Overview

Download & View L- 24 Variance Analysis2 as PDF for free.

More details

  • Words: 498
  • Pages: 11
Variance Analysis

Performance report usually means a comparison of actual results with some Budget/Standard

Variance is a deviation of an actual amount from the expected or budgeted amount.

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Variance Analysis - Objective •

Identify the causes of the variances of financial performance and



Identify Organizational Unit/Activity/Person responsible for it.

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Analytical Framework used for

Variance Analysis - Identify the key causal factors that affect profits. - Break down the overall profit variance by these causal factors. - Estimate the degree of impact of each factor on the profit. - Try to calculate the specific, separable impact of each causal factor by varying only that factor, holding all other factors constant. - Add complexity sequentially, one layer at a time.(peel the onion) - Stop the process digging dip when the further digging is not justified ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Variance Analysis Total Variance

Non Mfg Costs Variance Admn.

Mktg.

Materia l

R&D

Direct Labor

Mfg Costs Variance Variabl e Cost

Variabl e O/H

Sales Variance Fixed Cost

Volume

Market Share

Selling Price

Industr y Volume

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Favorable or Unfavorable Variance? • To determine whether a variance is favorable or unfavorable, use logic rather than memorizing a formula.

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Sales Variance

ariance + SPV = Actual Qty. Sold * (Budgeted Price – Actual Price)

geted Qty. Sold S Mix V = Budgeted Price* (Budgeted Mix of Actual Qty. - Actual Mix of Actual Qty.) ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Cost Variance :– Material

Price Variance

MPV = Material Price Variance = Actual Usage * (Budgeted Price – Actual Price)

M Mix V = Budgeted Price * (Budgeted Mix of Actual Usage - Actual Mix of Actual Usage) ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Cost Variance :– Labor

e Variance +

Labor Rate Variance = Actual Usage * (Budgeted Rate – Actual Rate)

te * Labor Idle Time variance = Idle Time * Budgeted Rate Labor Efficiency Variance = Budgeted Rate * (Standard –Actual Input) ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Input Horngren/Sundem/Stratton

Cost Variance :– Overhead Fixed Overhead Fixed Overhead Variance = (Actual Output * Standard Fixed O/H per unit) - Actual F O/H incurred Standard F O/H per unit = Total Standard Fixed O/H output

/ Budgeted

Variable Overhead

ual Output * ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Standard V

Reasons for Variance • There are basically two reasons why actual results might differ from the standard.

activity and fixed costs per peri

vities were

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

n

Thanks ………

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton

Related Documents

L- 24 Variance Analysis2
November 2019 2
Requirements Analysis2
November 2019 4
Water Analysis2
April 2020 13
Salt Analysis2
July 2020 11
Variance Analysis
May 2020 23