Course Content
Accounting Principles and Standards, Preparation of Financial Statements
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Accounting Concepts and Principles: Theoretical Framework
Accounting Standards : IFRS, IAS & GAAP
Responsibilities of IASB
Indian Accounting Standards (Ind AS)
Types of Account
Types of Expenditure
Financial Statement Analysis: Ratio Analysis, Funds Flow and Cash Flow Analysis, DuPont Analysis
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Financial Statements List
Important Terms
Ratio Analysis
Funds Flow Analysis
Flow of Funds
Cash Flow Analysis
Ind AS 7: Cash Flow Statement
DuPont Analysis
Preparation of Cost Sheet, Marginal Costing, Cost-Volume Profit Analysis
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Important Principles in Cost Accounting
Implicit Cost & Explicit Cost; Accounting Profit & Economic Profit
Law of Diminishing Returns
Economic Theory of Production
Production Theory in Micro Economics
Special Types of Costs
Cost Theory in Economics
Short-Run Costs in Perfect Competition
Marginal Revenue & Profit Maximizing Rule
Shutdown Rule in Short Run
Short Run in Monopoly
Preparation of Cost Sheet
Fixed Costs (F.C.) , Variables Costs ( V.C.) and Contribution Margin
P/V ratio ( Profit / Volume ratio)
Break Even Point (B.E.P.) & Margin of Safety (M.O.S.) & Law of Diminishing Return
Cost-Volume Profit Analysis
Standard Costing & Variance Analysis
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Inventory Valuation Method
Standard Costing
Material Variance
Volume Variance
Overhead Absorption Rate
Overhead Expenditure Variance
Variable Overhead Cost Variance
Overhead Spending Variance
Labour Efficiency Variance
Unit IV: Managerial Accounting

Volume Variance typically refers to the differences between the expected (standard) level of activity and the actual level of activity. Volume variances are particularly important in the context of fixed costs, as these costs do not vary with production levels in the short term. The volume variance specifically addresses the impact of production volume (or activity level) on fixed costs, typically for both overhead and profitability.

Here are the key types of Volume Variance:

1. Overhead Volume Variance

Explanation: This variance measures the difference in applied fixed overhead based on the actual production volume compared to the standard (budgeted) volume. It isolates how much of the overhead variance is due to a difference in production levels.

Formula:

Overhead Volume Variance = (Actual Production Units − Budgeted Production Units) × Fixed Overhead Rate per Unit

  • A favorable variance occurs when the actual volume is higher than expected (more units produced, more overhead absorbed).

  • An unfavorable variance occurs when the actual volume is lower than expected (fewer units produced, less overhead absorbed).

Example: If the factory planned to produce 10,000 units (standard volume) and applied fixed overhead based on this number but only produced 8,000 units, this would create a volume variance that shows how much of the fixed overhead was under-applied due to the lower production.

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