Working notes on the things that decide whether a set of management accounts can be trusted: variance decomposition, product costing, inventory valuation, and consolidation across entities and currencies. Written for controllers and group accountants, not for a search engine.
Budget said 650,000. Actual came in at 570,500. A profit bridge splits that 79,500 gap into volume, mix, price, cost and exchange rate, with no residual bucket. Includes a worked example that ties to the last unit, and the mix mistake almost everybody makes.
Read the article →The full method including the conventions the profit bridge article had to choose between, what changes when the portfolio runs to thousands of lines, and how to isolate the exchange rate effect properly.
Setting standards that survive contact with the shop floor, and separating purchase price variance, material usage variance and overhead absorption so each one has an owner.
What a group of five companies actually needs to consolidate a budget and an actual, why the exchange rate belongs on its own line, and why the answer is rarely a new ERP.
Moving average against FIFO, what lot traceability should and should not change, and how a valuation method quietly decides what your gross margin looks like.
A short conversation is enough to tell whether a costing framework would help your business.
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