AFM481 Chapter Notes - Chapter 7: Fineness, Activity-Based Costing, Longrun

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM481
• Professor: Grant Russell

Document Summary

Variance analysis: management took that enables management by exception: management by exception: focusing management attention on areas where performance fails to meet expectations. Favourable (f) variance: results in an actual operating income that exceeds the budgeted amount: unfavourable (u) variance: result in an actual operating invome that is less than the budgeted amount. If variances are likely to harm the organization, determine what caused the failures and find remedies: change expectations and revise the budget, regain control of costs by changing operations. Implement the decision, evaluate performance and learn: future budgets may incorporate results of current variance analysis. Signal but no insight to the management about how the large unfavourable variance rose. Fineness: level of detail in financial accounting: characteristic of reliable information that identifies cause with effect and cost with benefit, the finer the detail and the clearer the cause-effect relationships, the more readily costs can be controlled.