Several tools are available to managers to assist them in evaluating organizational performance, one of them being variance analysis. Variance analysis compares actual costs and quantities with standard costs and quantities. The results from a variance analysis are important for helping managers control costs (price variances) and identify areas where organizational performance and efficiency can be improved (quantity variances). In this Discussion, you will use an example from your professional career to consider the role of variance analysis in the decision-making processes for an organization.
To prepare for this Discussion:
• Consider the role of variance analysis in decision making and how understanding variances, both favorable and unfavorable, might help contribute to improved organizational efficiency.
• Identify an example from your professional career in which both highly favorable and unfavorable variances occurred.
Post an explanation of the role of variance analysis in managerial decision making, to include the following: (the assignment should be 300 words or more)
• Describe an example from your professional career in which both highly favorable and unfavorable variances occurred.
• Identify what stakeholders were most affected by these variances.
• Explain how understanding these variances could have helped you as a manager in this situation to make better decisions.
https://openstax.org/books/principles-managerial-accounting/pages/8-2-compute-and-evaluate-materials-variances
https://openstax.org/books/principles-managerial-accounting/pages/8-3-compute-and-evaluate-labor-variances
https://openstax.org/books/principles-managerial-accounting/pages/8-5-describe-how-companies-use-variance-analysis
