Variance Reporting
Variance reporting is the process of communicating the results of variance analysis to management. Variance analysis is the process of comparing actual costs to standard costs. Variances can be favorable or unfavorable. Favorable variances indicate that actual costs are less than standard costs, while unfavorable variances indicate that actual costs are more than standard costs.
Reporting to Management
The purpose of variance reporting is to inform management of the variances and to identify the causes of the variances. This information can be used by management to take corrective action to improve performance.
Reporting Format
The format of variance reporting can vary depending on the company. However, there are some common elements that are typically included in variance reports. These elements include:
- The type of variance
- The amount of the variance
- The cause of the variance
- The corrective action that has been taken or is planned
Frequency of Reporting
The frequency of variance reporting can also vary depending on the company. However, variance reports are typically issued on a monthly or quarterly basis.
Conclusion
Variance reporting is an important part of standard costing. Variance reports can help management to identify areas where costs are too high and to take corrective action to improve performance.
Here are some additional tips for effective variance reporting:
- Make sure that the reports are clear and concise.
- Tailor the reports to the needs of management.
- Use graphs and charts to illustrate the variances.
- Follow up on the corrective actions that have been taken.