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Related to variance analysis: standard costing
Fig. 88 Variance analysis. The relationship of the main cost variances.
variance analysis the breakdown of differences between the STANDARD COST (revenue) of a product and its comparable actual cost (revenue) into their constituent parts. Variance analysis highlights matters which are not proceeding to plan, enabling managers to take corrective action to deal with losses or inefficiencies. The main variances are MATERIALS-COST VARIANCE, the LABOUR-COST VARIANCE, the OVERHEAD-COST VARIANCE and the SALES-REVENUE VARIANCE. Fig. 88 shows the main cost variances and how they are linked.