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Standard Costing and Variance Analysis as an Aid to Management Decision Making

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Description

– Standard Costing and Variance Analysis as an Aid to Management Decision Making –

Download Standard Costing and Variance Analysis as an Aid to Management Decision Making. Accounting students who are writing their projects can get this material to aid their research work.

Abstract

The purpose of most business organizations is to minimize costs and maximize revenue. This means they can ensure the growth and continuity of any business enterprise. To achieve these aims, therefore, there is a need for proper and adequate planning and control in a business setup.

There are various costing systems used by the management of any business organization to aid planning and control and one of the important systems is standard costing.

Standard costing is a control device that tries to establish in advance the expected cost and revenue of future production. It indicates the amount expected to provide and sell a product. Standard costing helps in the achievement of the operational efficiency of a business. It presents planning of what is expected to be produced.

Introduction

The word variance will represent the difference between the standard cost of production and the actual cost of production or the difference between the budgeted revenue and the actual revenue. The process of classifying a given variance into its sub-variance is described as variance analysis.

A given variance may be interpreted to represent adverse or favorable to the adverse of the standard cost of production is lower than the actual revenue.

On the other hand, a variance will be interpreted to mean favorable to the organization if the standard cost of production is higher than the actual cost of production or the budgeted profit is lower than the actual profit.

The focus of this study is to offer empirical evidence on how variance analysis helps to control cost.

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