102 Finiz 2015 - Controlling VARIANCE ANALYsIs IN MANUFACTURING COMPANIEs Marko Milojević 1 *, Lidija Barjaktarović 1 , Zlatomir Milošev 2 1 Singidunum University, Faculty of Business in Belgrade, 32 Danijelova Street, Belgrade, Serbia 2 FCA Serbia d.o.o., 4 Kosovska Street, Kragujevac, Serbia Abstract: In dynamic and constantly changing contemporary business conditions, it is of key importance to dispose of adequate and relevant information on movements in the manufacturing process and to make adequate business decisions. Traditional accounting is not able to respond to all challenges, and thus it is necessary to enable better understanding of the manufaturing processes and the effects of various factors on the final outcomes and product costs. Several different models of cost accounting have been proposed with certain advantages and flaws, depending on the complexity of production and management requirements. Variance analysis is a tool that financial controllers and corporate financial managers use to interpret variations in operating results compared to the result envisaged by the budget or budget revision throughout the year. The aim of this paper is to analyse the effects of variance analysis in the manufacturing company as a result of its good managerial accounting. The subject of this paper is one company, and its course from the budget as the basis for implementation of variance analysis, to realization and explanation of discrepancies between these two scenarios. Key words: variance analysis, budget, planning, management, business results. Singidunum University International Scientific Conference CONTEMPORARY FINANCIAL MANAGEMENT UPRAVLJANJE FINANSIJAMA U SAVREMENIM USLOVIMA POSLOVANJA DOI: 10.15308/finiz-2015-102-110 E-mail: mmilojevic@singidunum.ac.rs 1. INTRODUCTION It is hard to imagine business of a contemporary, glob- ally - oriented company without the follow-up and necessary information on the manufacturing process. Apart from being correct and true, information also needs to be provided in the right place and at the right time. In the contemporary busi- ness world, belated piece of information has no value and it is almost valueless. Variable analysis is one of the tools used by the managers to become conversant with the current busi- ness situation and provide favourable operating results in the future. More precisely, this paper places an emphasis on the variance analysis, which refers to examining the role, signif- cance and possibility of using it in a manufacturing company. Te role of the analysis of variance is gaining more and more importance as managers want to know how correc- tions/ changes of specifc input in manufacturing could affect operating results. Terefore, the analysis of variance could be defned as a tool used to detect deviations of the accom- plished operating results compared to the expected results in the budget, which also represents the main goal of this re- search. Furthermore, it is used by a company’s management to be able to clearly perceive all aspects of doing business, to react to potential problems in due time, and to eliminate these problems along with their associates with the aim of maximizing results and improving the company’s productiv- ity. Te analysis of variance is done each month during ‘the closing period’ and it enables a company’s management to analyse all anomalies in the company, to prepare action plans for the following periods in order to fx the anomalies (here we refer to negative anomalies, as positive anomalies imply the improvement of the results) and to avoid potential nega- tive effects on the company’s results. Te analysis of variance proceeds from a company’s budget, which is used to explain the current result through various variances (Hillier, 2006). As we have already mentioned, a month, a period or a whole year can be compared, having in mind that the analysis of variance at the end of the year cannot be used as a correction tool, but only as a fnal explanation for the deviation from the planned result. On the other hand, the analysis of vari- ance for a month, and especially the analysis of variance for a period, represent a signifcant tool for the management by which they can take corrective measures in order to mini- mize the deviation from the planned result. Te analysis of variance can be shown by table and graphs, depending on the level of details to be seen and the level of observation of the current results.