3. COST ACCOUNTING AND RATE DETERMINATION › 3.8 Periodic Variance Analysis

3.8 Periodic Variance Analysis

Since rates are typically based on a prediction of future
costs and utilization levels, a periodic variance analysis is
an important method for validating the rate structure.  This
variance analysis should analyze actual costs using the cost
determination model you selected and compare the actual cost
to the forecast.  Use the same process to analyze the
resource utilization levels.  The two types of analyses
should then prepare you for the next rate-setting exercise.
New accounting systems should make sure to use a periodic
variance analysis to help set and validate the rate schedule.