What is the importance of reporting variances in standard costing systems?

What is the importance of reporting variances in standard costing systems?


The process of standard costing involves the establishment of standard costs and computation of actual cost and the comparison of actual costs and standard costs. The difference between actual costs and standard costs is known as variance. Merely, finding the variance does not solve the issue unless proper actions are taken accordingly. Keeping an eye on the standard costs and their variances keep the management informed of the effectiveness of the production process as well as the work of personals who are supervising the production process. Thus, reporting of variance becomes an important part in standard costing system as it contains the detailed analysis of variances, specifying the causes which lead to these variances which enable the management to take corrective actions in order to reduce variances.
What are the pre-requisites for reporting the variances effectively?
The pre-requisites for reporting the variances effectively are as follows:…
Explain Fixed Overhead Variance. How are they computed?
The common methods used for analyzing the fixed overheads variances are:..Overhead cost Variance...
Define Variance types and their components
Material cost variance : It is the difference between the actual material cost and standard material cost. It is further divided into: …
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