Chapter 11 - Standard costs and variance analysis. In this chapter students will be able to: Explain the role of variance analysis in the strategic management process, describe a standard costing system and how it is used, calculate and journalize direct cost variances, . | Lecture Cost management Measuring monitoring and motivating performance 3rd edition Chapter 11 COST MANAGEMENT Measuring Monitoring and Motivating Performance Third Canadian Edition ELDENBURG WOLCOTT CHEN COOK Chapter 11 Standard Costs and Variance Analysis Learning Objectives LO1 Explain the role of variance analysis in the strategic management process LO2 Describe a standard costing system and how it is used LO3 Calculate and journalize direct cost variances LO4 Analyze and use direct cost variance Information LO5 Calculate and journalize variable and fixed overhead variances LO6 Analyze and use overhead variance information LO7 Journalize closing entries for manufacturing cost variances LO8 Calculate and analyze profit-related variances Appendix 11A LO1 Explain the role of variance analysis in the strategic management process Variance Analysis and the Strategic Management Process Variance analysis is the process of calculating variances and investigating their causes. This information is then used for decision making. Variance analysis is valuable because managers identify the reasons for the variances and use that information to improve future strategies or operating plans. Investigating Variances In a diagnostic control system managers throughout an organization regularly monitor variances to determine whether operations are proceeding according to plan. Managers perform detailed investigations only for variances they consider important. Importance is decided in two ways. First the variances that will be calculated and monitored need to be chosen. Second for variances that are measured and monitored managers decide whether a particular amount of variance is large enough or consistent enough to justify investigation. Conclusions and Actions LO2 Describe a standard costing system and how it is used Standard Costs Standard cost is the cost managers expect to incur to produce goods or services under operating plan assumptions. Key assumptions include the .
