In managerial accounting, the need for management to understand the sources from where variances arises

November 13th, 2007 Comments off
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It is obvious that management needs to understand the sources where certain variances arises. Whether it is a favorable or adverse variance, the said variance need to be investigated hence the need to understand the sources from where the variances arises. Below is tabulated some of the major variances and its sources:-

Variances Source
Sales PRICE Actual selling price
Sales VOLUME Actual units sold
Direct materials PRICE Actual cost of materials
Direct materials USAGE Actual usage of materials
Direct materials MIX Material Mix
Direct materials YIELD Actual output
Direct labor RATE Actual labor rate
Direct labor EFFICIENCY Actual productivity
Variable production overhead EFFICIENCY Actual consumption per unit of output
Variable production overhead EXPENDITURE Actual variable production overhead
Fixed production overhead EXPENDTIURE Actual fixed production overhead

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Financial Accounting

 
 

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