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Is Required Standard Cost & Veriance Analysis In Construction Industry

Created by : santhosh bhatt, Accounts Executive/Accountant, First Indian Corporation  | 10 20 2009 14:52:59 +0000
Industry : ConstructionFunctional Area : Capital Management(Corporate Finance)
Keywords : c. a. i. j. e. f. d. h. g. b. labour total variance material usage variance sales volume variance material price variance selling price variance material total variance fixed production overhead total variance and all sub-variances variable overhead total variance and all sub- variances labour efficiency variance labour rate variance
Activity:  447 views;  last activity : 12 29 2010 07:48:57 +0000

A variance is the difference between an actual result and an expected result. The process by which the total difference between standard and actual results is analysed is known as variance analysis. In accounting, a variance is the difference between an expected or planned amount and an actual amount. For example, a variance can occur for items contained in a department’s expense report. Variance analysis attempts to identify and explain the reasons for the difference between a budgeted amount and an actual amount.

  
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There has to be a provisioning for cost inflation of the raw material and there should be historic data which can to some extent take care of the same.
By Harshit A Shah, Consultant, Independent Consultant  | 12 29 2010 07:48:57 +0000
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I agree the points given by Brajesh Mishra.
By Boopathy , Sr accounts executive, steria India  | 12 29 2010 04:40:16 +0000
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There is every possible chance of variation in prices of building materials over project construction period.So varriance can not be ruled out. So to minimise/ check/ control it, there should be proper planning of activities involved in the project at the same time study of materials/ resources involved with each activities/ tasks should also be done to avoid cast over run.One must keep eye on the schedule of the project simultaneously to avoid delay and have a control over critical activities which directly affect the completion time of project as well.
By Brajesh Mishra, Construction / Contract Management, UPSSCL  | 12 28 2010 16:33:28 +0000
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 In present scenario because of inflation the prices of cement, steel etc. are growing day by day. Which is directly affecting the profit margin of the construction industry,finaly it will increae the construction cost it will effect the end user or consumer.

 

I would like to recommend the construction industry that.

  • Company should take mesure to face inflation like inceasing prices of cement, steel,bricks,sand & other raw material.
  • Company try to utilization of all available resources
  • For each and every activities there should be proper planning & ensure that all required material should be available in time to reduce Labour idle time.
  • Company try to have there own construction equipment like ex.Tower crane,Tipper,Tractor,Motor pumpsts,Hand tools,bulldozer, Forklifts, Pick n carry Cranes etc,it will reduce hiring cost & it will useful for future perspectives.

 

  • Company should try to reduce westage of material & setup waste contol management to reduce  westage of material.and

 

  • Applying Variance analysis which help the company in identifying the area where cost control measure can be used,so finally I would likes to recommend that every construction companies should adopt Varince Analysis.
By santhosh bhatt, Accounts Executive/Accountant, First Indian Corporation  | 10 20 2009 14:52:59 +0000
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