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Cost Accounting - Variance and Budgets

Hello,

Can you help with the below:

In not less than 200 words and not exceeding 250 words for each question, submit logical answers to the following questions:

1. Discuss the relationship between variance analysis and management by exception.
2. What are the possible causes of material price variance and material efficiency variance?
3. Compare and contrast static budget and flexible budget.
4. Identify and discuss the link between variance analysis and responsibility accounting.

Thanks

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1. Discuss the relationship between variance analysis and management by exception.

Management by exception is a concept used to concentrate on areas that are not operating as expected while paying less attention to those areas that are operating as expected. The main purpose of this concept is to only bother management with considerable variances associated with the planned direction of the company in order to avoid wasting time and effort on parts of the company that are running smoothly. Variance analysis is one important element of management by exception. This type of analysis is used to identify and explain any differences between actual costs and standard costs allowed for output, which helps managers determine which areas are not operating as expected. The higher the variance, the more likely a certain area of the company is not operating as expected. Financial and operational results of a company are examined with only significant differences being brought to management's attention. The variance analysis is normally conducted by the company controller who will then notify management of any important variances in expenses that are higher than expected by either a specific dollar amount or percentage. By using variance analysis and management by exception, companies are better able to understand current costs and control future costs.

2. What are the possible causes of material price variance and material efficiency ...

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