Profit Variance Analysis

This study on applicability of standard magnitude variance analysis in determination of financial progress of selected business organizations in Calabar. Nigeria, was carried out to establish the nature and usage of standard magnitude variance as a statistical model developed to solve the problem of tied rank during selection of similar investment opportunities and also to determine progress in any given business data. Both primary and secondary data were used for the study. The data collected were analyzed using standard magnitude variance model, analysis of variance and chisquare test. The findings had shown that: In measuring the financial progress of selected business organizations in Calabar, Nigeria through the use of standard magnitude variance, there would be significant difference in determination of profit, production and sales than using any other measurement, standard magnitude variance analysis significantly determined the financial progress of business organizations as compared to any other method, and the perception of the operators of business organizations in Calabar, Nigeria on the use of standard magnitude variance in measuring their financial progress would be significantly different from their perception in using other traditional methods. The study recommended that: business operators should make effort to apply standard magnitude variance in determination of financial progress and stability of the businesses, rather than rigidly adhering to financial ratios as a traditional method of assessing financial performance of business. Finally, the implication and contributions of this work is that it would help the Accountants to render their advisory function much more objectively through the application of the model developed in this study.

International Journal of Accounting, Finance and Risk Management, 2020

Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.

East Asian Journal of Multidisciplinary Research, 2023

Standard Costing and variance analysis are a set of management accounting tools that assist industries in controlling the cost of production. It involved the establishment of a cost standard that is required, and the standard cost was applied for comparison to the product's actual cost. This article aimed to critically explore and assess the applicability of using standard costing and variance analysis as management accounting tools in today's varied worldwide industries. By compiling the findings from various scholars and researchers, this article primarily examines what standard costing methods and variance analysis are, as well as their advantages, limitations, and usefulness. Moreover, the proposed research framework on the motivation of industries in standard costing technique adoption and recommendations were added for future research purposes in this article. As a result, the article successfully concluded that standard costing techniques and variance analysis were relevant and crucial management accounting tools for industries today.

Journal of Accounting Education, 1988

This note describes an alternative to typical budgeting and variance analysis exercises. As a term project, students use financial planning software to prepare budgets and then use "what-if" techniques to facilitate profit variance analysis. The method enhances understanding of the relationships among budgets, eliminates formula-driven variance analysis, and elucidates the relationship between budgeting and variance analysis.

Journal of Accounting Education, 1999

In this paper we argue that if cost management is the primary purpose of a costing system, as opposed to external reporting, then it is often appropriate to report overhead variances as a period cost, rather than prorating these variances to various accounts. Further, we argue that reporting variances as a period cost may be appropriate in some situations even if external reporting considerations underlie the design of the cost system. However, a review of the accounting treatment of overhead variances in major cost/ managerial accounting textbooks indicates a clear preference for proration of overhead variances between product costs and period expenses, compared to reporting the entire variance as a period cost (expensing). Textbooks typically argue that proration is theoretically more correct and expensing is only acceptable where the variance is immaterial.

1999

Using a variance decomposition analysis the empirical literature on strategic management has determined the percentages of total rates of return’s variance due to corporation, market and business-unit effects. However, we still do not know what specific characteristics of corporations and markets cause the observed persistent differences in the returns of business units. In summary, the analysis of variance puts names to our ignorance. The main purpose of this paper is to show that the variance decomposition analysis is limited in its ability to explain the determinants of business unit performance. Our results show that the relative importance of corporation, industry and business unit effects change depending upon the estimation procedure and the model specification used. In particular, we find that part of the business unit effect may, in fact, be related to industry characteristics. We also show that firm diversification and market concentration tend to improve business unit per...

Dinasti International Journal of Management Science, 2021

The cause of this research is to investigate and prove the impact of ROA, ROE, NPM, and GPM on firm’s value (Tobin's Q) either partially or simultaneously and decide which profitability ratio is more dominant in explaining Tobin's Q variance. The analysis was carried out on companies listed in the Jakarta Islamic Index (JII) for 2015-2020. The sample selected was issuers consistently registered with JII during the 2015-2020 period, and 11 issuers were selected. The results of the analysis show ROA and NPM partially sizeable good-sized effect on Tobin's Q, whilst ROE and GPM do not have any effect. ROA is positively correlated, and NPM is negatively correlated. However, all independent variables simultaneously have a significant impact on Tobin's Q. The R-square value of is 0.953648 shows that 95.37% of Tobin's Q variance can be explained by changes in ROA, ROE, GPM, and NPM, while other factors outside the model cause the remaining 4.43%. Of the four variables te...

1989

Industrial Marketing Management, 2004

The aim of this study was to determine the extent and the reasons for variation in the profitability of a product. The underlying hypothesis was that all products are not profitable. Furthermore, it was assumed that activity-based costing (ABC) would indicate greater differences in the profitability of products than the previously used marginal costing system. The case study was conducted in a company in the metal industry that manufactures and assembles industrial goods. First, the activity chains were modeled and the activity-based costs were calculated. Second, the activity-based cost of the final products was compared with the selling prices to determine the profitability. The results show that the profitability varies significantly. The most profitable 20% of the products generate more than 150% of the profits and 50% of the net sales. Finally, the study identifies the characteristics of the most profitable products and discusses the reasons for the profitability. D

Procedia - Social and Behavioral Sciences, 2012

The level of results obtained by an enterprise represents, for any manager, a way to measure efficiency. Recorded results are noted in the Profit and Loss Account that explains how they are obtained for each activity, and help to make decisions at management level in order to coordinate the whole business activity. This account represents the financial statement that allows highlighting partial results of the three main activities (exploitation, financial and extraordinary) as well as whole results. The structure of this account allows money stocks accumulation to be released in order to fulfill the compensatory function of future financial factors and inputs, so called intermediate management balances.

The British Accounting Review, 1990

Most large manufacturing firms select cost variances for investigation by using cutoffs of fixed amounts or fixed percentages of the standard. This paper reports simulation results that these two commonly used rules are effective, but not efficient, in identifying out-of-control situations. Also, both rules are susceptible to an expost selection bias and tend to erroneously indicate shifts in cost means. In contrast, while random sampling was neither effective nor effkient, it provided a much more accurate picture of the underlying cost means. These results suggest that it may be desirable to use different selection rules to support different aspects (e.g., standard setting versus performance evaluation) of the control process. In recent years, intensifying global competition has greatly increased the importance of production efficiency to manufacturing firm viability and profitability (Kaplan, 1983; 1984). In a survey of senior corporate managers, 78% cited cost containment and productivity improvement as their top two priorities (McComas, 1986). Recent surveys have reported that the majority of large manufacturing firms exercise. cost control through standard cost systems (Laudeman & Schaeberle, 1983; Cress & Pettijohn, 1985; Schwarzbach, 1985). Since management time is a scarce resource, typically only the 'exceptional' cost variances are selected for further investigation. Even though many quantitative models have been developed to guide variance selection [see Kaplan (1975) for a review], this decision still tends to rely on simple rules of thumb. Over 95% of Cress & Pettijohn's (1985) respondents indicated

Manajemen dan Bisnis, 2023

Banks in carrying out the intermediation function require additional capital. Therefore, part of the bank's ownership is sold to the public in the form of shares and debt securities. Firm value is one of the indicators for investors in assessing the performance of a company. The aims of this study are: 1) To determine the factors that influence the value of Indonesian banking companies. These factors are capital structure, efficiency and size of the bank. 2) To find out that profitability moderates the value of Indonesian banking companies. This research uses quantitative verification research. The research analysis technique with moderate variables uses the Moderated Regression Analysis (MRA) model. Using secondary data from the financial statements of each bank. The financial reports are downloaded through the Indonesia Stock Exchange (IDX) website. Processing data using the e-Views 11 application. The results of this study show that the capital structure and the size of the bank have a significant positive impact on corporate value. If a bank is inefficient, it will not have a significant impact on corporate value. Profitability as a mitigation variable cannot amplify the impact of capital structure, efficiency, or bank size on corporate value.