For this task I will be discussing the effects of un-monitoring cost and budgets, and seeing how business could suffer if they are not look after responsibly. I will show disadvantages of not using this method properly. A cost of goods is what it should spend to make products. At the start of each period budget of production will be ready, using cost of goods and predicted production quantities. At the end of each period a variance report is prepared to compare the budget costs with the actual costs.
The variance report can tell how well Gardiner Store PLC did at carrying out their budget aims. A favorable variance shows that actual costs are less than budgeted costs. An adverse variance is just the opposite – actual costs are bigger than the budgeted costs. By using a budget the management team can predict their future costs and cash needs, plan production, etc. Variance reports can help the managers to identify specific functional areas where they came in either over or under budget. They will try to repeat their successes and get rid of their failures.
Each month they hope to become a little more efficient. If budgets and costs are unmonitored Two things mainly: Costs can run out of control, causing organisations to spend more than they need to, run inefficiently, reduce their potential profit or at worst turn a profit into a loss, and budgets can be overstated and if an organisation actually spends less than it expects to in a particular area than those funds can be made available elsewhere in the business. If costs aren’t monitored effectively such opportunities can be missed.
The Term Paper on Cost Accounting Variance Price Actual
Executive Summary By looking at the calculation result from Appendix, we are aware that the efficiency variances for material, labour and variable overhead, the labour price variance and spending variance for variable and fixed overhead turn out to be unfavourable and favourable. These results can be used to evaluate the Jigsaw department, and give the performance evaluation of Jason Cheng ( ...
If budgets are not controlled there are serious implications to the well-being: They will have to cut cost: The business need to do this because they haven’t monitor the business’ budget, so the actual costs will be higher than the budget costs, which gives out an adverse result on April (shown on the budget table of M4).
So they need to cut cost to cover the loss on April by May. They will have to make people redundant: People redundant can help the business to cut costs, but there will be not enough staff to work in the supermarket, which some service can’t be carried out to customers. But
because firing some staffs can help cut a lot, so they may need to take action. Other competitors will sell more products: Because the supermarket of Gardiner Stores PLC doesn’t have that much money for input because they need to cut costs to cover the loss of profit on April, also they make people redundant (explained above), so their competitors will take advantages on them, so therefore they will sell more product. Changes in costs Variances can arise for a large number of reasons: Errors in estimating Poor management of resources Unforeseen price changes Equipment breakdown Labor problems Poor planning
Shortage of raw materials Budgeting and Variance accounting presume that managers should fix problems, not bury or hide them. It also presumes that these problems are short-term problems, and can be effectively controlled in the future. Sometimes there is a change in actual costs that necessitates a change in standard costs. For instance, a new labor contract could increase total labor costs by a predictable amount. Standard labor costs should be re-calculated to reflect the new actual labor costs. Once a new standard cost is calculated, future variances will be correctly reflected in the monthly variance report.
The Essay on Marketing and Variable Cost Variances
(a) Refer to the Kinkead templates provided on the unit website. Template (A) calculates the market size, market share, sales mix, sales price and variable cost variances for each product and, Template (B) calculates the market size, market share, sales price, and variable cost variances for each product. Which analysis is most appropriate for Kinkead? A or B? Give reasons. Templete (b) What ...
If standard costs are not updated periodically, the monthly reports can show unrealistic favorable or unfavorable variances. The purpose of variances and budgeting is to give management an effective tool for controlling costs. But the system must be continually reviewed and kept up to date. This is also important, because variances are entered into the books as journal entries, so they must be based on reliable main rules. These rules must pass the critical eye of the company’s certified auditors, so they must be current and correct.
