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Essay text:
Variances are to be calculated for each department separately.
The standard/Budgeted values means the Budgeted Values for actual Output.
This Budget is called Flexible Budget ( How to Prepare?)
Variances are always the difference between values actually used and Budgeted
values for actual output.
All variances are in Dollars/Rupees.
Any Variance = Some Quantity * Some Price ? Another quantity*another price.
For any Case, follow the following steps:
1) identify causes for the variance
2) Hold some Department to be responsible for it.
3) Suggest remedial, if possible
2 Golden Rules:
Cost Control is always done on Actual Output
Inefficiency of one department should never be attributed/overlapped to
another department...
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