A monthly review of actual performance against annual budget
constitute standard costing and variance analysis. That simply
means seting up a standard and and comparing the actual performance
with the standard and analysing the variance if any and it's
couses.
The purpose or objectives of this type of review are as
follows:-
- It helps in performance evaluation of the fecility
- It helps in budgetary control in the organisation
- It helps to identify the couses of variance in budgeted and
actual performance
- It helps to identify the need for change in planning or
strategies
- It helps to reduce wastage of raw materials and other resources
through timely review
- It helps fecilitate optimum utilisation of available
resources.
- It gives relavent data relating to cost element to submit
quotations or to fix the selling price to the management
- It helps the management in accurate valuation of inventory. i.e
work in progress and finished goods.
- It helps the management in changing decisions in matters like
make or buy decision, price fixing etc.
- It act as an overall control measure to the management.