StudentShare solutions
Triangle menu

Management Finance - Essay Example

Not dowloaded yet

Extract of sample
Management Finance

Behavioral issues of standard costing include planning and operational variances which further includes materials, sales and labor variances. Planning and operational variances mean when plans or standards of a budget are normally depending on the expected environment where targets are decided. But in reality if the environment is not same as the expected one then the actual performance is compared with the standard performance to measure the changed conditions. In planning variance, we compare the set up standard with the revised standard and in operational variance we compare the actual output with the revised standard. The other important behavioral issues of standard costing involve Variable overhead variance and fixed overhead variance. Variable overhead variance can be defined as the difference between the standard or planned variable overhead cost which is allowed for the actual output and the variable overhead cost that has actually occurred. The variance is also called as expenditure variance as the variable overhead cost can vary with change in production thus a change in expenses amount can also be the reason of such variance (Drury, 2008, p.432). It can be expressed as follows- Fixed overhead is the portion of total overhead cost variance which can be occurred due to the difference between the standard cost of fixed overhead allowed for the output which is produced in actual. And the actual fixed overhead cost incurred. Fixed overhead variance can be derived as- Fixed overhead further expands itself as a. Budget or Expenditure Variance and b. Volume variance. Budget or expenditure variance is known as that portion of fixed overhead variance which occurs because of difference between actual fixed overheads and planned or budgeted fixed overheads during a particular period of time. It can be derived as follows- Volume Variance is the portion of fixed overhead variance which happens due to the difference between standard costs of fixed overhead which is allowed for the actual output and the planned fixed overheads for the particular period in which the actual out has been produced (Drury, 2008, p.438). Volume variance can derived as follows- Apart from measuring the variance analysis, we should also focus on the relationship between variance analysis and behavioral issues that occurs in an organization. Variance analysis measures the performance ability of the managers (Izhar, 2001, p.294). Managers know that their performing ability is judged by the variance analysis and their risk and reward depend either on adverse or on favorable result of variance analysis. Thus they have two ways, either they will work hard to achieve the standard amounts or they can manipulate the planned amounts. For this reason the organization should distinguish between controllable cost and uncontrollable cost. Controllable cost can be defined as those cost which can be controlled by the managers if they are efficient enough like cost of labor. It is a controllable cost and if management is efficient then they can reduce the labor cost by reducing number of the inefficient labors. They will hire only those labors that are skilled and efficient in the production line. Uncontrollable costs are those costs which cannot be controlled by management like cost of raw materials. Management cannot influence the cost of raw materials in the market (Bhattacharyya, 2011, pp. 539-540). Thus if the managers are judged by planning variance then they will be discouraged and de-motivated. It ...Show more

Summary

Finance and Accounting Management Finance Contents A. Behavioral issues that may emerge as a result of the current budgetary reporting system 3 B. Changes that should be made to the reporting system 7 C. Revised Report for the quarter ended August 8 References 11 Bibliography 13 A…
Author : zkris
Management Finance essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Management Finance"
with a personal 20% discount.
Grab the best paper

Related Essays

CORPORATE MANAGEMENT & FINANCE- Assessment Element 2
of the corporate management strategies on three supermarket chains of UK, namely, Sainsbury, Morrison and Tesco. For the assessment of the financial viability of the retail chains, their five year annual reports would be analysed and the findings of the study would indicate the most viable investment.
12 pages (3000 words) Essay
Finance Management
d company. Each of the division has considerable authority in all commercial and financing decisions. The only exception is that long term debt requires the approval and financing of the holding company. Analysis of business position Profitability- An important indicator of the financial health and management efficiency of the business is ‘profitability’.
18 pages (4500 words) Essay
Finance Management
The company over the years has grown and developed its various divisions. The main aim of this paper is to analyse the company and to make a brief analysis of the company’s current position. The paper also focuses on the current role of the financial manager and based on the analysis a detailed discussion for improvements has been included.
18 pages (4500 words) Essay
Management finance
The preparation of the reports should be appropriate and viable with the true performance of the company and its departments reflected in it. The authenticity of the report is dependent upon the accuracy of the information and data collected and provided
6 pages (1500 words) Essay
Corporate Management & Finance - Assignment 3
This has been experienced in housing offices, civic buildings, universities, colleges, roads, public realm, hospitals and rail constructions (Osborne, 2013). Similarly, Kier Group has been involved in facilities maintenance, environmental consultancy, maintenance of
5 pages (1250 words) Essay
Management Finance
Currently, Berry Ltd is using the traditional absorption costing system in which the organization uses single allocation base (machine hours). However, this mechanism has failed to generate accurate costing information relating to the products. Based on this premise,
9 pages (2250 words) Essay
Management finance
the proponents of ABC, it is justifiable to allocate overheads to production units based on cost drivers, which take into account the costs absorbed by individual products as opposed to using an absorption rate that allocates costs to products using a pre-determined figure
10 pages (2500 words) Essay
Management Finance
Therefore, each product cost will be directly proportional to the activities done in production (Baker 1998). Unlike the traditional method where cost share accumulated within departments, then allocated arbitrarily to products and services or customers. Activity based
10 pages (2500 words) Essay
Construction Management - Finance and Risk Management
The various smaller ports that has been developed in Turkmenistan across the Caspian ports mainly includes the Chekelen, Alaja and Ekarem and it requires the expansion of ports. In the year 2006 Turkmenistan possessed
15 pages (3750 words) Essay
Construction Management - Finance and Risk Management
The construction industry in Turkmenistan is the third largest industry. After the two industries of agriculture and gas and petroleum sector the third largest industry in Turkmenistan is
14 pages (3500 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation