Question

illustrate different methods available for deciding whether or not to investigate a variance caase

Answer 1

Managers typically establish criteria to determine which variances to focus on rather than simply investigating all variances

Variance analysis is the quantitative investigation of the difference between actual and planned behavior. This technique is used for determining the cause and degree of difference between the baseline and actual performance and to maintain control over a project.

Variance Analysis can be broadly classified into the following heads:

Material Variance
Labour Variance
Variable Overhead Variance
Fixed Overhead Variance
Sales Variance

There is a need of knowing types of variances before measuring the variances. Generally, the variances are classified on the following basis.

A. On the basis of Elements of Cost.

1. Material Cost Variance.
2. Labour Cost Variance.
3. Overhead Variance.

B. On the basis of Controllability

1. Controllable Variance.
2. Uncontrollable Variance.

C. On the basis of Impact

1. Favorable Variance.
2. Unfavorable Variance

D. On the basis of Nature

1. Basic Variance.
2. Sub-variance.