a) Briefly discuss the similarities and differences between the terms 'overhead absorption rate' and 'cost driver rate'.
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.
a) Briefly discuss the similarities and differences between the terms 'overhead absorption rate' and 'cost driver rate'.
b) Briefly discuss the meaning of the term 'sensitivity analysis' and how it could be used in variable costing.
c) Briefly discuss the characteristics of good information that budgets might be expected to possess.
d) Briefly discuss the reasons why payback period is often preferred as an investment appraisal technique, and also its limitations.
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