Chapter 17
Variance Analysis: To Tell the Truth
In This Chapter
Understanding and setting standard costs
Figuring out direct materials prices and direct labor rates
Using formulas to compute variances
Exploiting a short cut for calculating direct material and direct labor variances
Identifying variances that require further investigation
When things don’t go according to plan, inevitably you’re left asking “Why?” To find the answer, examine the factors under your control. For example, I don’t like to diet. As an accountant, I should enjoy counting calories. But I don’t. I don’t like exercise either. That said, checking my weight often leaves me asking “Why?” Inevitably, I thought I was so careful this week. Why did I gain three pounds? It all comes down to three factors under my control:
What I eat and drink
How much I eat and drink
How much I exercise
Examining each of these factors ...
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