Teaching Variance Analysis for Cost Accounting: How to Achieve above Par Performance

Ron Messer
  • January 2016, Emerald
  • DOI: 10.1108/s1085-462220160000018003

What is it about?

Teaching variance analysis as part of the accounting curriculum in business schools is typically a challenging task. Traditional pedagogical approaches encourage students to memorize and then mimic solutions to problems that are covered during class sessions. In an effort to teach this topic through problem solving rather than rote-learning, I have developed a more ‘common sense’ approach to analyzing variances that focuses on the underlying concepts and logic behind the exercise.

Why is it important?

As a result of changing my approach to teaching this topic, test results improved significantly and a larger proportion of students received a passing grade. In addition, students achieved better insight into the nature and purpose of variance analysis and their understanding of cost accounting improved.


Ron Messer
Kwantlen Polytechnic University

The proposed methodology examines variances as simply the differences between budgeted and actual results. The new approach (i) uses a golfing analogy as a frame of reference, (ii) includes questions to assist in the analysis and (iii) provides a table to organize and calculate variances. The variances examined include eight common expense-side variances used by manufacturers: material price and efficiency variances; labor price and efficiency variances; variable overhead spending and efficiency variances and fixed overhead spending and production volume variances. An application of the suggested approach, using a standard textbook problem, is also given.

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