Chapter 4
Accounting for Change with Variance Analysis
IN THIS CHAPTER
Understanding and setting standard costs
Figuring out direct materials prices and direct labor rates
Using formulas to compute variances
Exploiting a shortcut for calculating direct material and direct labor variances
Identifying variances that require further investigation
When things don’t go according to plan, inevitably you’re left asking “Why?” To find the answer, examine the factors under your control. For example, suppose you don’t like to diet. As an accountant, you should enjoy counting calories. But maybe you don’t. Maybe you don’t like to exercise either. That said, if you weigh yourself only to find that you’re gaining rather than losing weight, you may ask “Why?” You thought you were being so careful this week. Why did you gain three pounds? It all comes down to three factors under your control: what you eat and drink, how much you eat and drink, and how much you exercise. Examining each of these factors ...
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