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Management Finance - Essay Example
Finance & Accounting
Pages 10 (2510 words)
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…
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. ...
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