Answered: How frequently do you believe that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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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