9. Variance Analysis Flashcards
What 3 things do you need to calculate variances?
- Standard costs
- Budgeted volumes and costs/revenues
- Actual volumes and costs/revenues
What is the calculation for total materials variance?
ACTUAL production x standard cost
- ACTUAL cost of materials
What is the calculation for materials price variance?
ACTUAL quantity purchased x standard cost
- ACTUAL cost of materials
What is the calculation for materials usage variance?
ACTUAL production x standard usage
- ACTUAL usage
x standard cost per unit (e.g. kg)
What is the calculation for total labour variance?
ACTUAL production x standard cost
- ACTUAL labour cost
What is the calculation for labour rate variance?
ACTUAL hours paid for x standard cost
- ACTUAL labour cost
What is the calculation for labour efficiency variance?
ACTUAL production x standard hours
- ACTUAL labour hours
x standard cost per hour
What is the calculation for total variable overhead variance?
ACTUAL production x standard cost
- ACTUAL variable overheads
What is the calculation for variable overhead expenditure variance?
ACUTAL hours worked x standard cost
- ACTUAL variable overheads
What is the calculation for variable overhead efficiency variance?
ACTUAL production x standard hours
- ACTUAL labour hours
x standard variable overheads per hour
What is the calculation for sales price variance?
ACTUAL revenue
- ACTUAL sales units x expected revenue per unit
What is the calculation for sales volume contribution variance?
ACTUAL sales units - BUDGET sales units
x standard contribution
Why might we have an adverse sales price variance?
Offering a lower price (possibly to attract higher sales volumes)
Why might we achieve a favorable materials price variance?
Good negotiating or lower quality (cheaper) materials purchased
Why might we have an adverse materials usage, but favorable materials price variance?
Purchasing cheaper but lower quality materials, which lead to higher wastage
