Variable AnalysisIntroductionVariance analysis for the Brightlite product line will be used to drive management action as early as possible. This analysis will detail the examination of any variance between actual and standard costs. The results will determine the reasons why the budgeted results were not achieved. The types or variances calculated depend on the responsibility centers and management level for which the review is performed. Since the objective is to determine the degree of corrective action necessary, the calculated variances must relate to the key performance indicators considered critical to the success of the responsibility center. The primary goal of cost variance analysis is to enable organizational managers to detect and correct inefficiencies wherever they exist in expense-involving operations. Typically you need to decide what types of variances to calculate, whether or not to investigate, and whether or not to investigate a particular variance once it has been calculated. Variances The variances for the Brightlite lighting product line are as follows: a) Price variance for raw materials purchased = (standard price - actual price) * actual quantity purchased= (6.8-7.1)*11,400= (3,420) Ub) Variation in use of raw materials= (standard use - actual use) * standard price= ((1,900*5)-9,260 )*6.8= 1,632 Fc) Variation in direct labor rate= (standard rate - actual rate) * actual hours= ((14-14.35)*4.420= (1.547) Ud) Change in direct labor efficiency= (standard hours - actual hours) * standard rate= ((1.900*2.4)-4.420)*14= 1,960 Fe) Variable overhead variance= (standard rate - actual rate) * actual hours= ((12,...... middle of paper... ... it is difficult to accurately plan and control these types of costs . Corporate objectives should identify specific objectives and policies that will lead to organizational success before top management can budget amounts for discretionary cost activities.„X Control committed costs: Management must decide which activities are necessary to achieve corporate objectives. and determine what resources are needed to support those activities. ConclusionBudgets are established in part to provide a benchmark for evaluating performance. For cost centers, these budgets typically aim to achieve efficiency and control by specifying expected cost levels. Budget variances refer to deviations of actual spending levels from budget. Unfavorable budget variances typically require investigation, while favorable variances may require no explanation unless they are material.