To prepare for this Discussion: Review the Learning Resources for this week and reflect on how actual costs, standard costs, and variance analysis will contribute to your current or future role as a manager or in decision making. Consider the role of variances when engaged in decision making and how variance analysis might help contribute to improved organizational efficiency.
Prepare the following:
- Describe a scenario in which there are both highly favorable and highly unfavorable variances. Be sure to include the actual and standard costs in your scenario.
- Analyze how and why you, as a manager, would prioritize the variances for analysis and how knowing these variances might help you improve efficiency.
For this Assignment, review the information in the scenario. You will utilize the information in this weekâ€™s Resources and your course text to consider how variance analysis and the results obtained from conducting such an analysis might impact decision making. There is also an Excel template provided that you may find helpful in completing this Assignment.
- Part 1: Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.
- Part 2: Prepare a memo to your subordinate, using a program like Word.
- Summarize and analyze the actual costs in relation to the standard costs incurred for the month.
- Ask for clarification of any variances that need to be investigated.
- Be sure to include whether alternatives exist for the future of the organization and explain how the results of the variance analysis might influence those alternatives.
Zimmerman, J. L. (2011). Accounting for decision making and control (7th ed.). New York, NY: McGraw-Hill.
- Chapter 12, â€œStandard Costs: Direct Labor and Materialsâ€ (pp. 554â€“592)