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Essay / Research Paper Abstract
A 5 page paper assessing variances in standard and actual costs of a manufacturing company. The company determined standard costs for the production of a specific item, purchased what it believed would be the raw materials it would need for a subsequent month and now seeks to determine variances between actual costs and standard costs. Bibliography lists 4 sources.
Page Count:
5 pages (~225 words per page)
File: CC6_KSacctMfgCos.rtf
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Unformatted sample text from the term paper:
determined standard costs for the production of a specific item, purchased what it believed would be the raw materials it would need for a subsequent month and now seeks to
determine variances between actual costs and standard costs. One of the 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. 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) states that the created information often is "discarded once managers have explained the variance to superiors" (p. 1). Walker (2005) 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. Coate and Frey (1998) explain that the emergence and growth
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