VARIANCE ANALYSIS IN MANUFACTURING COMPANIES

In dynamic and constantly changing contemporary business conditions, it is of key importance to dispose of adequate and relevant information on movements in the manufacturing process and to make adequate business decisions. Traditional accounting is not able to respond to all challenges, and thus it is necessary to enable better understanding of the manufaturing processes and the effects of various factors on the final outcomes and product costs. Several different models of cost accounting have been proposed with certain advantages and flaws, depending on the complexity of production and management requirements. Variance analysis is a tool that financial controllers and corporate financial managers use to interpret variations in operating results compared to the result envisaged by the budget or budget revision throughout the year. The aim of this paper is to analyse the effects of variance analysis in the manufacturing company as a result of its good managerial accounting. The subject of this paper is one company, and its course from the budget as the basis for implementation of variance analysis, to realization and explanation of discrepancies between these two scenarios.