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Product costing (standard costing & variance analysis)

Submitted by admin on Thu, 23/12/2010 - 4:57pm

An important part of standard cost accounting is variance analysis, which breaks down the variation between actual costs and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate actions to correct the situation.

The reason why companies need to do variance analysis is to learn. Learning means looking at point-in-time variances which will already help you, but to make real gains, you have to look at trends over time. If we see a negative variance over time from €0,05 to €0,15 to €0,25, then we can say there is a steady trend of increasing costs which should be investigated.

B&M helps companies with setting up variance analysis structures that will allow our clients to identify problem areas and take actions to minimize those variances. When reviewing the variances, we train our customers to focus on the important exceptions so management can become aware of changes in the organization and the environment.

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Product costing (standard costing & variance analysis)

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