Three Components of COGS VariancesĬost of Goods Sold (COGS) refers to the direct costs of all components used during the manufacturing process. ![]() However, in this article, we’ll cover COGS variances (i.e., variances to costs of goods sold) versus the annual budget.Īlthough it would be nice if actual results during the year matched what we initially planned, we all know that business changes are typical after budgets are established, leading to variances and necessary explanations. Variance analysis usually involves comparison of many time periods or benchmarks. And, of course, this analysis usually occurs during the month-end close process, when things are most hectic. Any accounting or finance professional will tell you that the window of time to unearth the cause of variances is critical. ![]() During any financial review, variances against plan are always items of intense discussion and require in-depth analysis.
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