Chapter 12- Advanced Variances Flashcards
What is variance analysis?
Process by which the total difference between standard and actual results is analysed
What are the 2 sales variance calculations?
Sales price variance
Sales volume variance
What is the calculation for the sales price variance?
Actual quantity sold x Actual price
Actual quantity sold x standard price
What is the calculation for sales volume variance?
Actual quantity sold x standard margin
Budget quantity sold x standard margin
If there is a favorable variance in sales price what does this mean?
Price increases due to:
Higher customer demand
Lower than anticipated demand for competitors products
Improved quality or performance
If there is a favorable variance in sales volume what does this mean?
Increase in demand due to:
A lower price
Improved quality or performance
A fall in quantity or performance of competitors products
Successful marketing campaign
If there is an adverse variance in sales price what does this mean?
Price decrease due to:
Lower than anticipated customer demand
Higher than anticipated demand for competitors products
Reduction in quality or performance
If there is an adverse variance in sales volume what does this mean?
Fall in demand due to:
Higher prices
Lower quality
An increase in quality from competitors
Unsuccessfully marketing campaign
What are the 2 material variances?
Materials price variance
Materials usage variance
What is the calculation for finding the material price variance?
Actual quantity bought x actual price
Actual quantity bought x standard price
What is the calculation for finding the material usage variance?
Actual quantity used x standard price
Standard quantity used for actual production x standard price
What would cause a favorable materials price variance?
Poorer quality materials
Discounts for buying in bulk
Cheaper supplier
Incorrect budget
What would cause a favorable materials usage variance?
Higher quality materials
More efficient use of material
Change is product specification
Incorrect budgeting
What would cause a adverse materials price variance?
Higher quality materials
Change to a more expensive supplier
Unexpected price increase
Incorrect budget
What would cause a adverse materials usage variance?
Poorer quality materials
Less experienced staff using more materials
Change in product specification
Incorrect budgeting
What are the 2 labour variances?
Labour rate variance
Labour efficiency variance
How do you calculate the labour rate variance?
Actual hours x actual rate
Actual hours x standard rate
How do you calculate the labour efficiency variance?
Actual hours x standard rate
Standard hours for actual production x standard rate
What would cause a favorable labour rate variance?
Lower skilled staff
Cut in overtime bonus
Incorrect budgeting
What would cause an adverse labour rate variance?
Higher skilled staff
Increase in OT or bonus
Unforeseen wage increase
What would cause a favorable labour efficiency variance?
Higher skilled staff
Improved staff motivation
Incorrect budgeting
What would cause an adverse labour efficiency variance?
Lower skilled staff
Fall in staff motivation
Incorrect budgeting
Material mix and yield variances are calculated if..?
A product contains more than one type of material
These materials are interchangeable
What are the 2 material variances?
Material price variance
Material usage variance
What are the 2 variances within materials usage variance?
Material mix variance
Material yield variance
What does material mix variance measure?
The impact on profit of a change in the mix of materials
What does the material yield variance measure?
Measures the impact on profit of a different output being produced from a given input than standard
What is a mix variance used for?
To monitor the cost of material
What are some problems when calculating mix and yield variances?
Should only be used when the kid is controllable
It is often found that the mix and yield variances are interdependent
What are the 2 variances with sales mix and quantity’s?
Sales price variance
Sales volume variance
What are the 2 variances within sales volume variance?
Sales mix variance
Sales quantity variance
What does a sales mix variance indicate?
The effect on profit of changing the mix of actual sales from the standard mix
What does the sales quantity variance indicate?
The effect on profit of selling a different total quantity from the budgeted total quantity
How do we calculate operation variance?
Actual sales units x standard margin
Revised budgeted sales x standard margin (to achieve target of actual market)
How do we calculate planning variances?
Revised budgeted sales x standard margin (to achieve target of actual market)
Original budgeted sales x standard margin
