Page 227 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Introduction

The term “Variance” means deviation, difference and so on. The variance in accordance with
standard costing is meant as the difference/deviation in between two different costs viz standard
cost and actual cost. According to ICWA, London defines the variance as “deviation in between
the standard cost and comparable actual cost incurred during the period.”
The variance of the specific element of cost should be periodically checked. The variance is
classified into two categories.

Figure 11.1

The variance can be classified into two categories, based on controllability viz. controllable and
uncontrollable variance.

Figure 11.2

The purpose of standard costing is to correct the variance, which is in between standard cost and
actual cost.

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