Chapter 10

Chapter 10 - Variances are calculated for materials, labor,...

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Profit and Cost Center Performance Evaluation Maher 10e Chapter 10 1
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Learning Objectives 1. Explain reasons for conducting variance analyses. 2. Describe how to use budget for performance evaluation. 3. Identify different types of variances between actual 4. Assign responsibility for variances. 5. Describe the role of variance analysis in service organizations. 6. Explain the difference between price & efficiency variances. 7. Identify the relation between actual, budgeted, & applied fixed manufacturing costs. 2
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Reasons for Variance A variance is the difference between a predetermined norm or standard & actual results Standards may be biased Systematic reasons Change in prices More/less efficient use of inputs 3
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Types of Variances
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Unformatted text preview: Variances are calculated for materials, labor, fixed & variable manufacturing overhead. Variances are divided between Price variance Efficiency variance (Production volume variance for fixed manufacturing overhead) 4 The general model shows how a total variance is divided between price & efficiency. The general model shows how a total variance is divided between price & efficiency. 5 Overhead Variances Variable overhead price variance results when the cost per machine hour is more/less than the standard allowed. Variable overhead efficiency variance results if machine hours required to make the actual production output exceed the standard machine hours allowed to make that output. 6...
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This note was uploaded on 01/14/2012 for the course ECON 121 taught by Professor Mcdevitt during the Winter '10 term at UCLA.

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Chapter 10 - Variances are calculated for materials, labor,...

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