Professional Documents
Culture Documents
amount. Variance analysis is one step in the process of identifying and explaining the reasons for
different outcomes.
Variance analysis is usually associated with a manufacturer's product costs. In this setting, variance
analysis attempts to identify the causes of the differences between a manufacturer's 1) standard or
planned costs of the inputs that should have occurred for the actual products manufactured, and 2) the
actual costs of the inputs used for the actual products manufactured.
Assume that a company manufactured 10,000 units of product (output). The company's standards
indicate that it should have used $40,000 of materials (an input), but it actually used $48,000 of
materials. The variance analysis may include the following:
The variance analysis of manufacturing overhead costs is more complicated than the variance analysis
for materials. However, the variance analysis of manufacturing overhead costs is important since these
costs have become a large percentage of manufacturing costs.
Fav/unfavorable xxxxxxxx
Fav/unfavorable xxxxxxx