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When we analyses the actual manufacture cost. First of all, we determined the usage of the manufacture process from raw material, labor hour and factory overhead. After that we compare the actual usage with the stander usage exist in the cost budget. Determined the standard variance if we found it and for which part it related raw material, labor hour or factory overhead and if it’s favorable or unfavorable. And after that we determined the reason for that variance if it is material price variance or labor wage rate variance or material use variance or the labor hour use variance.
When we know where is the variance and its reason we report that variance for the directors to take decision.
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