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Management and cost accounting

Search for the following concepts when looking for appropriate resources:

�Variance analysis in cost accounting
�Budget versus actual gross margin
�Types of cost variance
�Division cost and variance analysis

The bibliography needs to be done as an APA formatted annotated bibliography. Please use the link

below to see how an annotated bibliography is formatted.

�Each cited source needs to be specifically linked to the concepts in the case. Please do not cite

random sources.

�Make sure your annotation captures the important point of the source. Please do not give a one-

sentence summary.


Annotated Bibliography
DRURY, C. M. (2013). Management and cost accounting. Springer.
In accounting, the term variance analysis is a result of the relationship between costs of
elements. To understand this term we need to find the meaning of the components of the term
variance as used in accounting. Standard cost is defined as the pre-determined cost of a certain
element of production. A standard cost is actually referred to as what an item must cost under
given circumstances. The term standard costing on the other hand is different from the term
standard cost. While standard cost is the cost of an item under a given circumstance, standard
costing is the concept in accounting that is used to determine the standard for every element of
cost. These costs predetermined by standard costing are compared with the actual costs of the
elements and the deviation is referred to as variance. Therefore, Variance is defined as the
particular difference between the actual cost and the standard cost for each element in a
particular period. Variance analysis on the other hand is defined as the particular process
through which variance is subdivided in such a way it enables the management to assign
responsibility for off-standard performance. Therefore, the genesis of the term variance has
been defined explicitly through first the definition of the components of the term itself, then the
term variance and lastly variance analysis.
Datar, S. M., Rajan, M. V., Wynder, M., Maguire, W., & Tan, R. (2013). Cost accounting: a
managerial emphasis. Pearson Higher Education AU.
Actual gross margin is defined as the difference between what is left of the selling price
of a product after subtracting all the variable and not fixed costs involved in the sale of a
products. In simple words, actual gross margin is the revenue received from the sale of an item
minus the cost of the goods sold. In the business industries, budgets are the primary planning

tools for any business. However, if the budget does not clearly outline the gross margin, then
the approximation in the budget are not realistic and the business will fail. It will fail either
from the wrong approximation of the prices of products and the wrong approximation of the
money needed to start a business. This makes these business have prices of products that are
too low in the cost of running the business becomes too high. Eventually, the business that
appeared to be thriving fails. Hence, the significance of the gross margin which essentially
shows the profit to be earned from selling a given product, is very crucial to a budget.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
From the definition of variance, we get three components of the production process that
determine the type of cost variance. Two of the three components which are self-explained
include material and labour. These two components result to the material cots variance and
labour cost variance. The third component is the overhead cost. The overhead costs represent
all the other costs that are not primal to the production process. Material cost variance is the
difference between the standard material cost and the actual material cost. The difference
between the two costs gives a deviation known as material cost deviation. Labour cost variance,
is the difference between the standard wages that are specified and the actual wages that are
paid. The difference between the wages specified and the wages aid is what gives birth to the
variance known as labour cost variance lastly, the overhead cost variance refers to the
difference between actual overhead cost incurred and the standard overhead cost absorbed. The
components of the overhead costs include the actual overhead, standard hourly rate and
standard hours of actual production. The three types of cost variance are according to the cost
components of the production process.

Chidyausiku, C., Swanepoel, T., Barnard, J., De Jongh, T., Bibbey, F., & Kauta, L. (2015).
Cost and managerial accounting control.
In managerial accounting, the terms division cost and variance analysis affect ad
influence one another. Furthermore, one is used to determine the other term. Thus their
relationship is quite significant. To explicitly understand the implicit meaning of these two
terms. We need to define them and come up with the correct analysis of what they mean and
refer to as afar as accounting is concerned. Variance in managerial accounting refers to the
critical investigation of variances to financial performance from the standards identified in the
company’s or organizational budget. Essentially, variance analysis helps a great deal in
budgeting for the right amount of specific costs in the right way. It defined whether the
business will be profitable by a certain gross margin or not. Therefore, variance analysis is a
very significant to managerial accounting. In accounting the division cost is calculated as the
difference between the actual profit and the standard profit for what the business will achieve
when some of the products are divided to the amounts that will fit the approximated cost of the
budget. This element of costing is very dependent on the variance analysis of the various
components of the cost variances. Hence, the division cost is determined only when the
variance cost is determined. However, the two components seem to be proportional. In a way
that when division cost is varied depending on the cost variance of a given component of



Chidyausiku, C., Swanepoel, T., Barnard, J., De Jongh, T., Bibbey, F., & Kauta, L. (2015).
Cost and managerial accounting control.
Datar, S. M., Rajan, M. V., Wynder, M., Maguire, W., & Tan, R. (2013). Cost accounting: a
managerial emphasis. Pearson Higher Education AU.

DRURY, C. M. (2013). Management and cost accounting. Springer.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

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