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.
Outline 2 potential causes for each of the material and labour variances
The distinction between the standard cost of direct materials indicated for fabricating and the real taken a toll of direct materials utilized in fabricating is known as the direct material cost variance. Material cost variance provides a sign of how much more or less cost was produced as compared to the standard cost. Hence, variance Investigation is a compelling strategy to keep an eye on a firm's extend of deviations from the standard.
Reasons for material variance:
- Variation in the market price
- Improper mixing of material
- Pilferages, abnormal wastage
- Negligently handling of material etc.
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