Participation Exercise #13 - Assignment Example

Participation Exercise #13: How does variance analysis affect decisions make by management? Variance analysis provides the management with an understanding of the difference between the actual costs incurred and those planned for during the development of the project. Variance analysis may prove vital in indicating to the management the different costs they need to evaluate critically and eliminate to keep the project costs controllable. As a way of ensuring that all costs remain controlled, variance analysis needs considering when making decisions in management.

The management may also realize that the materiality of the variance may affect the general gains to result from the project. These provide an avenue for creating change for better project returns. Failure to consider these costs may result in growing variance in costs, which may indicate poor planning for the management. Why was the cost per pound figure so important to Carnegie? Explain? As one way of having surety on the actual costs incurred in the project, Carnegie found it easy to make decisions on projects knowing the actual gains he makes from them.

Cost per pound figures aided Carnegie have a competitive advantage in that he could set his prices as low as he wanted just to win a bid without negatively affecting his business’s profitability. While the competitors guessed on what was best to charge on their products, Carnegie knew exactly the actual costs he incurred and the returns to expect (Spafford). Carnegie used this to make more sound decisions in his business hence the successful returns while the competitors found it difficult to compete and had their attempts at winning bids from him fail.

Through these, Carnegie kept track of his variances and hence keeping his costs in check. Work cited:Spafford, George. The Power of Variance Analysis. Project Management August 2003. Viewed on June 01, 2015 from http://www.projectmanagement.com/articles/177431/The-Power-of-Variance-Analysis#redirect