Page 113 - 5.2 i. Manac Costing ITC Summarised Notes

STANDARD COSTING

Investigation of variances

• Not all variances should be investigated as this process is

very expensive and time consuming.

• Consider the following before an investigation is

undertaken:

• Cost vs. Benefit

• Materiality
• Interdependency of variances

• Type of standard used
• Cumulative variances

• Variances may be due to random / uncontrollable or chance fluctuations
for which no cause can be found
• Nature of the variance

• The investigation of variances should result in an appropriate
remedial action being taken, or if it is found that the variance is due

to a permanent change in the standard, the standard should be
changed.
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