Answered: How frequently do you believe that…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter10: Standard Costing And Variance Analysis

Section: Chapter Questions

Problem 10DQ: When should a standard cost variance be investigated?

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How frequently do you believe that firms should conduct variance analysis? Explain why?

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Variance analysis a technique of control that is used by organisations to compare actual costs with standard costs and find out variances for the same. Then organisation has to take corrective actions for the same. Variance can be favourable or unfavourable.

For example, direct material cost variance tells about the difference between standard cost of materials and actual cost of materials. If actual cost of materials is more than standard cost, then variance is unfavourable and organisation has to find out reasons for the same.

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