a) When comparing projections to actual results, variance analysis is a popular management accounting technique. Interestingly,...
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a) When comparing projections to actual results, variance analysis is a popular management accounting technique. Interestingly, a CIMA survey (as quoted in your text), examined the extent to which the use of variance analysis varies with business size. According to the survey, the use of variance analysis increases with the size of the business. What is meant by variance analysis? When and why is it used? (5 marks) b) Investigating unfavourable variances is considered an aspect of management accounting practice. Is there value in investigating favourable variances? Explain. (5 marks) c) Identify five examples of cost items that would likely be variable costs for any given Starbucks store in Shanghai. And provide five examples of cost items that are likely to be fixed costs for any given Starbucks store in Shanghai. (5 marks) Hint: Provide two lists of costs, one for Variable and one for Fixed. d) What costs might a business incur as a result of holding too low a level of inventories? List two potential costs to a business of holding low inventories. Explain each cost briefly so your point is understood. (5 marks) e) What types of businesses are likely to have high operating leverage (operating gearing)? Provide an example of a company that is likely to have high operating leverage and one that is likely to have low operating leverage. Explain. (5 marks) a) When comparing projections to actual results, variance analysis is a popular management accounting technique. Interestingly, a CIMA survey (as quoted in your text), examined the extent to which the use of variance analysis varies with business size. According to the survey, the use of variance analysis increases with the size of the business. What is meant by variance analysis? When and why is it used? (5 marks) b) Investigating unfavourable variances is considered an aspect of management accounting practice. Is there value in investigating favourable variances? Explain. (5 marks) c) Identify five examples of cost items that would likely be variable costs for any given Starbucks store in Shanghai. And provide five examples of cost items that are likely to be fixed costs for any given Starbucks store in Shanghai. (5 marks) Hint: Provide two lists of costs, one for Variable and one for Fixed. d) What costs might a business incur as a result of holding too low a level of inventories? List two potential costs to a business of holding low inventories. Explain each cost briefly so your point is understood. (5 marks) e) What types of businesses are likely to have high operating leverage (operating gearing)? Provide an example of a company that is likely to have high operating leverage and one that is likely to have low operating leverage. Explain. (5 marks)
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a Variance analysis is a management accounting technique used to compare the difference between planned or budgeted figures and actual results It involves the examination of the variations or discrepa... View the full answer
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Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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