When variances have been determined, management should, decide whether each variance is sufficiently significant to require an investigation and explanation. Management should investigate and obtain, from the responsible Department Heads, explanations of significant variances which have occurred; then take corrective actions and recognize and reward desirable performances, where appropriate and then revise the standard if needed. Discuss the above statement; looking at what is variances, the different types of variances within the organization, the causes and how management can address these variances to the benefit of the organization
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
When variances have been determined, management should, decide whether each variance is sufficiently significant to require an investigation and explanation.
Management should investigate and obtain, from the responsible Department Heads, explanations of significant variances which have occurred; then take corrective actions and recognize and reward desirable performances, where appropriate and then revise the standard if needed.
Discuss the above statement; looking at what is variances, the different types of variances within the organization, the causes and how management can address these variances to the benefit of the organization
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