Accounting Project Topics

Standard Costing and Variance Analysis as an Aid to Management Decision Making. (A Case Study of Dangote Group Companies)

Standard Costing and Variance Analysis as an Aid to Management Decision Making. (A Case Study of Dangote Group Companies)

Standard Costing and Variance Analysis as an Aid to Management Decision Making. (A Case Study of Dangote Group Companies)

Chapter One


The two main objectives of the study are:

  1. To identify the extent to which variance analysis provide direction to the causes of non-performance as against standard performance.
  2. To find out whether variance analysis enhances management improvement in operations.




Lucy T. defines standard costing as a technique which established pre-determined estimate of the cost or production and the compare these pre-determined costs with actual cost as they are incurred.

He also defined variance analysis as the process by which total deference between actual cost and standard cost is broken into different element is known as VARIANCE ANALYSIS

Awoyemi P.F defines standard costing as techniques which uses standard forecast and revenue analysis. He defines variance analysis as a control device which ensures that action to the plan variance occurs when actual cost deduction can either be favorable or unfavorable. It can be used in variety of costing situation batch and mass production process manufacturing, transportation and certain aspect repetitive work and even in jobbing manufacture.

Therefore, both T. Lucy and Awoyemi P.F definition of standard costing and variance analysis are of the management tools used to control a business organization.


The contemporary dictionary gives a simple necessary to the world standard as normal by relating the world to accounting therefore, standard is normal or excellent level of activity express in terms of cost standard are performance expectation that can be classified as.

  • IDEA STANDARDS: These are standard that are attainable under the most favorable condition without any allowance for idea time e.g. machine breakdown. They are normally used for investigation and development purpose but not for normal day to day control activities.
  • NORMAL STANDARDS: These are attainable standard that consider certain unavoidable situation during computation, such as consideration of normal wastage, machine breakdown etc. it represent the degree of efficiency that reasonably can be expected under prevailing condition. It can be used for a product costing, cost control, stock valuation and base for a budget.
  • BASIC STANDARDS: There are long term standard and which would remained fixed over the year. They represent a special class of a statistical nature prepared for some base year trend over time for items like materials price, labour rate efficiency and affect and effect of change method which efficiency or inefficiency and would not normally from part of reporting system expect as a base or standard exercise.
  • CURRENT STANDARDS: They are standards which are set for use over a limited period of time to reflect current condition they represent the achievement level that management aim at critical period at particular example of the use of current standard could be set on monthly by monthly basis using the price level adjusted by suitable indices for the month by month control.


  • Direct material cost standard
  • Direct labour cost standard
  • Overhead cost standard
  • Manufacturing overhead cost standard
  • Administration and selling overhead cost standard

Direct material cost standard is part of price cost and it is variable in nature. It is based upon price and quantity standard and has the formula.


S= standard

D= Direct

M= Material

P= Price

Q= Quantity

Materials price standard: It is assets in the purchasing department in arriving at these, the following factors are considered.

  • Freight
  • Discount
  • Price list

In arriving at the standard price freight discount if any etc. deducted from the price list.

Material quantity (USAGE) standard: this is the expected to be used in producing certain quantity of the output. It is arrived at after deducting wastage from the weight of the output.






Research is carry out in order discuss new information and to expand the verified existing knowledge. It aims at finding out fact and making suggestion base on interpretation of data analysis.

The essence of this chapter is that it described the procedure method used in the collection of data for the study. It also deals with the method for the data analysis.


The population of the universe of potential observation about which the research to make some general statement or inference the population at the study. This includes staff of production department, sales department and account department.




This chapter comprises the analysis data collection in chapter three for the purpose of analysis simple percentage system in which statistical relationship between among variables.

In this chapter, the data collection from the questionnaire administered are table analysis.

During the course of the work (85) questionnaire were distributed to the employed of dangote flour mill and (80) were returned with complete information, the remaining (5) were not returned.




The research has been on the use of standard costing and variance analysis as an aid to management decision making.

A compressive definition of standard costing and variance Analysis was given in the introductory chapter of this research work.

The aims of the research study was to initiate the management of dangote flour mill, any business organization with the positive impact of standard costing and variance analysis do have in management decision making.

The research work deal with the classification of standard and the types of standards cost and variance analysis. Moreover, computation of some important variance were computed or more detailed understanding of variance analysis the importance and limitation of standard costing and variance analysis extensively discussed.

The researcher also discussed the importance of the standard performance of an employee in the employee in the organization. This is done in order to achieve the organization goal.

The relationship of standard costing method with techniques exemplifies on the principles of management by exemption were any the effort of executive are concentrate on any significant deviation from expected results.


The fact has been established that standard costing and variance analysis has facilitated management decision making of dangote flour mill. It has helped the management of dangote flour mill to take accurate decision on cost planning and control. This has assisted the company to minimize profit.

Furthermore, the use of standard costing and variances analysis in management quality for the product of the company and reliability of the product.

Standard costing and variance analysis has helped management in making decision as regard economy effectiveness and efficiencies in the use of application and man power.

Therefore, the application of standard costing and variance analysis has contributed to the success of the organization as well as to company.


The variance department heads should ensure that those under then adhere strictly to instruction and do their works at the right time as expected of them. Idleness should be strictly guided against in order to facilitate achievement of the overall goal and objectives of the organization.

The management should try to develop adequate channel of product raw material on credit effort should be made on wage to develop sources of raw materials.

Any standard set should be motivating force for the works. The work should be adequately educated or the standard set proper co-ordination and control should be instituted to ensure the achievement of the goal.


  • Adeniji, A.A. (2016). Cost accounting. A managerial approach (1st Ed), Lagos: El-Toda Ventures limited.
  • Awoyemi P.F Management Accounting volume 1&2
  • Akokoye D (2016): lecture note on management accounting world Biggs cost accounting
  • Anthony R.N & Glen, A.W Fundamental of Management Accounting.
  • Betty (2017) E.L B.S and MacDonald and Tuance Ltd; Management Accounting.
  • Colander, D. (2017). On the treatment of fixed and sunk costs in the principles textbook. Journal of economic education 35(3): 360-364.
  • John (2015):  Financial training publication Ltd; A practical approach to Management Accounting.
  • Horngen C.T (2015): N.J practice hall Cost and Management Accounting Managerial Emphasis.
  • Horngen C.T, Sundem G. L & Stratton W. O. (2015): Introduction to Management Accounting, 13th edition. New Jersey. Prentice Hall Inc.
  • Lucey, T, (2015); Management Accounting, 5th Edition London. Letts Educational.
  • Okoye A.E (2014); Cost Accounting; Management Operational Applications. Mindex press. Benin City. 2nd Edition.
  • Zimmerman, J. L. (2014). Accounting for decision making and control, New York: McGraw-Hill Irwin.
  • Zimmerman, J. L. (2014). The costs and benefit of cost allocation. Accounting Review 54 (3): 421-504.


WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!