Question
In manufacturing companies, cost accountants usually calculate the standard cost variances (budget variances) and present them to managers to take the necessary corrective actions. Although
In manufacturing companies, cost accountants usually calculate the standard cost variances (budget variances) and present them to managers to take the necessary corrective actions. Although it is very important to analyze and investigate all the budget variances, most of the executive managers require the managerial accountants to study and arrange the significance of different variances and determine which variances are the most significant for immediate corrective actions. Write a paper to discuss methodologies and approaches used by managerial accountants to rank the significance of the standard cost variances. Be sure your paper includes the following:
- Brief explanation of how the standard costs are developed.
- Discussion on the role of the standard costs as a control tool.
- Explanation of the conceptual framework for each variance (including the direct material variances, the direct labor variance, and the manufacturing overhead variances).
- Discussion on different methodologies/approaches used by the managerial accountants to rank the significance of the variances.
- Your opinion on which methodology is considered the most reasonable and effective one.
- Your opinion on the expected benefits and the informational content of ranking the significance the budget variances.
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