Chapter 23: Performance Evaluation Using Variances From Standard Costs Flashcards
Standard cost per unit =
Standard Price * Standard Quantity
When a cost variance is favorable, what does it mean?
It means the actual cost is less than the standard cost
Occurs when the actual cost exceeds the standard cost
Unfavorable cost variance
Total manufacturing cost variance =
Total standard costs - total actual costs 
Actual Direct Materials =
Actual Price * Actual Quantity
Standard Direct Materials =
Standard Price * Standard Quantity
Total Direct Materials Cost Variance=
Price Difference + Quantity Difference
 Direct labor cost variance =
Rate difference + Time difference
Standard Rate * Standard Time
Standard Direct Labor Cost
Actual Rate * Actual Time
= Actual Direct Labor Cost
Direct Materials Price Variance =
(Actual Price-Standard Price) * Actual Quantity
Direct Materials Quantity Variance=
(Actual Quantity-Standard Quantity) * Standard Price
Direct Labor Rate Variance =
(Actual Rate Per Hour-Standard Rate per hour) * Actual Time/Hours
Direct Labor Time Variance =
(Actual Time - Standard Time) * Standard Rate per hour
Factory overhead costs are budgeted and controlled by what?
 separating factory overhead into fixed and variable components
Factory overhead rate =
Budgeted factory overhead at normal capacity / normal productive capacity
Variable factory overhead rate =
Budgeted variable overhead at normal capacity / normal productive capacity
Fixed factory overhead rate =
Budgeted fixed overhead at normal capacity / normal productive capacity
 The variable factory overhead controllable variance is what?
The difference between the actual variable overhead costs and the budgeted variable overhead for actual production.
(Actual Var. Factory Overhead - Budgeted Var. Factory Overhead)
What is the budgeted variable factory overhead?
The standard variable overhead for the actual units produced
Budget it variable factory overhead =
Standard hours for actual units produced * variable factory overhead rate
 Fixed factory overhead volume variance =
(Standard hours for 100% of normal capacity - Standard Hours for Actual Units Produced) * Fixed Factory overhead rate
The difference between the actual factory overhead and the applied factory overhead is what?
The total factory overhead cost variance
 Total factory overhead cost variance =
variable factory overhead controllable variance + fixed factory overhead volume variance
Applied factory overhead =
Standard hours actual units produced × total factory overhead rate
 at the end of a period, the factory overhead account typically has what?
A debit or credit balance
An ending factory overhead balance mean what?
The overhead is under applied and total factory overhead is unfavorable
What does a ending credit balance and factory overhead mean?
Overhead is overapplied and total factory overhead is favorable
 Controllable variant =
Actual overhead incurred - budgeted overhead
Volume variance =
Applied overhead - budgeted overhead
