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XL260 Variance Removed

XL260 Variance Removed

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03/18/2014

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\u00a92002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton
Variance Analysis
Performance report
usually means a
comparison of actual
results with some
Budget/Standard

Variance is a deviation
of an actual amount
from the expected
or budgeted amount.

2
\u00a92002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton
\u2022
Identify the causes of the variances of financial
performance and
Variance Analysis - Objective
\u2022
Identify Organizational Unit/Activity/Person
responsible for it.
3
\u00a92002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton
Analytical Framework used for
Variance Analysis
-Identify the key causal factors that affect profits.
- Break down the overall profit variance by these causal factors.
- Estimate the degree of impact of each factor on the profit.
- Try to calculate the specific, separable impact of each causal
factor by varying only that factor, holding all other factors
constant.
- Add complexity sequentially, one layer at a time.(peel the onion)
-Stop the process digging dip when the further digging is not
justified

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