Business 2: Variance Analysis Flashcards
Performing a budget variance analysis involves doing what?
Comparing actual results to the annual business plan to determine favorable and unfavorable variances
In a standard costing system, what costs are used for all manufacturing costs (i.e. raw materials, DL, and manufacturing O/H)?
Standard costs
For DM and DL, what two variances are typically calculated?
1) Price (rate) variance
2) Quantity (efficiency) variance
In analyzing MOH, what does a net debit balance mean?
- MOH underapplied
- Unfavorable variance
In analyzing MOH, what does a net credit balance mean?
- MOH overapplied
- Favorable variance
Variable MOH variance can be further broken down into what two types of variances?
1) Rate (spending) variance
2) Efficiency (usage) variance
Fixed MOH variance can be divided into what two types of variances?
1) Budget (spending) variance
2) Volume variance
In a standard costing system, how do you calculate direct cost?
Std. direct cost = Std. price * Std. quantity
In a standard costing system, how do you calculate indirect (OH) costs?
Std. indirect costs = Std. (predetermined) application rate * Std. quantity
What are the three purposes of a standard costing system?
1) Cost control
2) Data for performance evaluations (variance analysis)
3) Ability to learn from standards and improve various processes
How do you calculate DM price variance?
= Actual quantity purchased
* (actual price - std. price)
How do you calculate DM quantity usage variance?
= Std. price
* (actual Q used - std. Q allowed)
How do you calculate DL rate variance?
= Actual hours worked
* (actual rate - std. rate)
How do you calculate DL efficiency variance?
= Std. rate *
actual hours worked - std. hours allowed
VOH rate (spending) variance = ?
= Actual hours worked
* (actual rate - std. rate)
