Advanced management accounting Essay Example | Topics and Well Written Essays - 1500 words

Advanced management accounting - Essay Example They cannot control costs well without preparations the statements that reconcile expected revenue and expenditure with budgeted figures. In this regard, the paper aims at preparing a statement giving the budgeted, actual, and variances. The information above reveals that L10 has a favorable variance because the actual expenditure is less than the budgeted amount whereas L17 has an adverse variance sine the actual number exceeded the budgeted expenditure. The quantity put into books may not be the same as the one sold. It is due to favorable or unfavorable operating conditions. In obtaining the variance, the actual amount sold is subtracted from the standard number. The result is multiplied with the standard selling price. The information of Geeta plc allowed the calculation below in determining the sales volume variance. Labour cost variance has been given a definition by Drury (2008) as the difference between the actual labour cost incurred and the budgeted cost. It is made up of labour rate variance and labour efficiency variance. The employees in an organization may take more hours in completing tasks than what the budget allowed. Conversely, the conditions may allow the workers to spend less time in completing the activities assigned to them. Either way, the variance arises. It is calculated by finding the difference between the time allocated in the budget and the real time taken at standard wage rate (Lucey, 2002). In every organization, decision making process requires certain information. The crucial information involves cost analysis. The costs have different behavior, and it becomes necessary for management accountants to prepare cost reports allowing efficient management of costs. The statements categorize costs. In doing so, the managers are able to identify relevant and irrelevant costs. Lucey (2002) defines relevant cost as the one that can