The analysis of variance is an essential management accounting approach used to determine the cost of a product and its profitability. Managers use variance analysis to make judgments regarding the expenses of labour and materials that are incurred as a result of the production of a product or the provision of a service. In relation to the above, critically appraise five (5) differences between fixed and variable costs along with examples of each cost. Critically evaluate the purposes and features of marginal costing?
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.
The
In relation to the above, critically appraise five (5) differences between fixed and variable costs along with examples of each cost. Critically evaluate the purposes and features of marginal costing?
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