CORRELATION ANALYSIS OF COST VARIATION.
To maximize the managerial usefulness of a standard-cost system, it is necessary to analyze the variance of actual cost from standard cost. The article suggests a method of isolating a portion of variance which is for the most part noncontrollable, and thus, of calling attention to that part of variance for which management can legitimately be held accountable. By means of multiple correlation analysis of past variance, the portion which can be related statistically to cost factors which are beyond the control of the production executives is isolated and subjected to numerical measurement. By this statistical segregation of presumably noncontrollable variance the portion of cost disparity which is most clearly a function of managerial efficiency is dramatically brought to the attention of the executive so that it can be made the subject of a special investigation. Certain peculiar advantages may be realized by firms which have a very simple type of cost system. Such firms may find in this statistical analysis of variance a cheap substitute for the valuable control devices of a parallel current cost system and a comprehensive flexible cost budget.
- DOI
- 10.2308/tar-7076940
- Volume
- 12 (1)
- Pages
- 55-60
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref