ABSTRACT
Variance analysis is therefore concerned with recording, explaining and assessing the difference between forecast data and the actual results which occur. This chapter focuses on the technically detailed form of variance accounting called standard costing, which is used in the manufacturing industry, local authorities and other sectors engaged in repetitive or batch process production or services. The procedure for standard costing consists of five basic steps: set the standards; record the actual costs; calculate the variances; analyse the variances; Take appropriate action. The chapter explores the variance calculations for a standard costing system, with the overall variance at the top of the pyramid and the sub-variances. It discusses the advantages and disadvantages of a standard costing system. Many exception reporting systems that use such techniques concentrate only on the adverse variances, the usage in this case, as they appear to be more likely to be the root of the problem.
