1THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF ACCOUNTING ACCT2522 Management Accounting 1 Session 1, 2009 Tutorial Week 6 - Standard costing and variance analysis Overall Theme This week we look at a very useful “management accounting control” tool, namely, variance analysis. We explore how total variance can be broken down into more meaningful components to allow better understanding of the reasons behind a discrepancy between the actual and budgeted amounts. Desired Learning Outcomes and Essential Reading Langfield-Smith Chapter 10 After completing this topic, you should be able to: 1.Explain how standard costing can be used to help control and manage resources; 2.Describe and understand how to set standards; 3.Understand how participation in standard setting, and the choice between perfection and practical standards, can impact on behaviour; 4.Develop standard costs for direct material and direct labour; 5.Calculate and interpret Direct Material and Direct Labour variances; 6.Understand how to determine the causes of variances, and when to take corrective actions; and 7.Describe some behavioural effects of standard costing systems.
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