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Essay / Research Paper Abstract
A 9 page paper discussing this traditional accounting tool and some of the reasons for its falling out of favor over time. The theory of constraints and its throughput approach as well as activity-based costing have been instrumental in turning interest away from variance analysis. The Harvard-style bibliography lists 9 sources.
Page Count:
9 pages (~225 words per page)
File: CC6_KSacctVarABC.rtf
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Unformatted sample text from the term paper:
traditional accounting tools is variance analysis, which is the examination of what was expected compared to what actually occurred. It combines forecasting and examination past events, both of which
are valuable activities. One problem arises with forecasting, which assesses future events and conditions, when the future always is uncertain. Another is the allocation of costs; what seems
to be straightforward not always is. The result has been that variance analysis is still useful where it is used, but it is used less commonly now than in
the past. Analysis of Variance Variance analysis is the process of seeking causes for variances between expected (i.e., standard) costs and actual costs.
A favorable variance is that in which actual costs are lower than expected costs; in an unfavorable variance the actual costs are more than expected costs. The information
resulting from variance analysis is useful in future planning and controlling costs, and it may be useful in evaluating performance. Though one of the most valuable aspects of variance
analysis is the information that results from it, Emsley (2000, p. 1) states that the created information often is "discarded once managers have explained the variance to superiors."
Walker (2005, p. 43) presents a scenario to which she applies variance analysis. Though variance analysis techniques can be used in any setting where
a standard unit cost and a specific selling price are known, either one of those entities can change quickly in todays business environment. An example can be seen in
personal computers in late 1999 and beyond. Many people purchased computers in advance of the Y2K date scare, buying computers known to be compatible with the change in century.
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