BEC - B4: Variance Analysis Only Flashcards
The variance that arises solely because the quantity actually sold differs from the quantity budgeted is called:
Sales volume variance.
Flexible budget variance, on the other hand, deals with costs, not revenues. It is the difference between the actual amounts and the flexible budget amounts for the actual output achieved.
The difference between standard hours at standard wage rates, and actual hours at standard wage rates, is referred to as which type of variance?
Labor Usage variance.
The production volume variance is due to ?
- Inefficient or efficient use of DLH
- Difference from the planned level of the base used for OH allocation, and the actual level achieved
- Significant shift in the mix and yield of DL relative to static budget
- Efficient or inefficient use of variable OH
(2) - Difference from the planned level of the base used for OH allocation, and the actual level achieved.
Production volume will go up/down when you use a different base.
The performance of a standard cost center should be evaulated by comparing?
- Actual costs with
- Flexible budget costs
This is because flexible budgeting adapts budgeted per-unit & fixed cost totals to the actual volume of production that went out.
In other words, performance should be evaluated by comparing what was expected to happen, given actual level of production, with what actually happened.
Which of the following standard costing variances would be least controllable by a production supervisor?
(a) labor efficiency
(b) overhead volume
(c) overhead efficiency
(d) material usage
(b) overhead volume.
This is a function of the budgeted amount of overhead compared with actual overhead applied, at a predetermined rate, to WIP. The production supervisor has little control over established standard vs. budgeted amounts.
other answers:
the supervisor has some control over actual hours worked, actual production, and therefore has the ability to at least slightly affect the other variances.
Variance Ratio: Sales Price Variance
SP Variance = (Actual SP / unit) - (Budgeted SP / unit) * actual sold units.
Does not utilize contribution margin.
Variance Ratio: Market Share Variance
Market Share Variance =
(Actual Market Share % - Budgeted Market Share %) * Actual Industry units * Budgeted contribution margin / unit
Variance Ratio: Market Size Variance
Market Size Variance =
( Actual Market Size (units) - Expected Market Size (units) ) * Budgeted Market Share % * Budgeted CM/ unit
Variance Ratio: Sales Volume Variance
SV Variance = (Actual units sold - Budgeted sales) * Standard CM / unit.
Controller found a 250,000 favorable flexible budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. The variance can be wholly explained by…?
Changes in unit selling prices.
Changes in the number of units sold would be compensated for by the flex in the flexible budget.
Sales volume variances = changes in the number of units sold.
Total Flexible budget variance = deals with costs, not revenues.
What is the equation for direct labor efficiency variance?
DL Efficiency = Standard rate * (Actual hours incurred - budgeted hours allowed)
This efficiency measures whether production process is favorable/unfavorable because it took a shorter/longer amount of time than expected to produce a certain amount of finished product.
What is the equation for direct material / labor price variance?
DL / DM Price = Actual units purchased (or hours incurred) * (Actual price paid - Price budgeted)
