Chapter 5: Variance Analysis Flashcards

1
Q

What is a variance?

A

Difference between actual results and the budget or standard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How do you calculate sales price variance?

A

Actual quantity sold x Actual Price (AQAP)

Actual quantity sold x Standard Price (AQSP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How do you calculate sales volume variance?

A

Actual quantity sold x standard margin (AQSM)

Budget Quantity sold x Standard Margin (BQSM)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What causes a sales price variance?

A

Higher than expected discounts offered to customers to persuade them to buy, or due to purchasing in bulk
Lower than expected discounts, perhaps due to strength of sales demand
Effect of low price offers during a marketing campaign
Market conditions forcing an industrywide price changes
Changes to product quality or design

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What causes a sales volume variance?

A

Successful or unsuccessful direct selling efforts
Successful or unsuccessful marketing efforts
Unexpected changes in customer needs and buying habits
Failure to satisfy demand due to production difficulties
Higher demand due to a cut in selling prices, or lower demand due to an increase in sales price
Changes to the level or nature of competition
Changes to product quality or design

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How to calculate material price variance?

A

Actual quantity paid x Actual price (AQp AP)

Actual quantity paid x Standard Price (AQp SP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How to calculate closing inventory of material?

A

Actual quantity paid x Standard Price (AQp SP)

Actual quantity used x Standard Price
(AQu SP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How to calculate material usage variance?

A

Actual quantity used x Standard Price
(AQu SP)

Standard Quantity x Standard Price (SQ SP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the causes of a material price variance?

A

Using a different supplier
Changes to volume leading to achieving/losing bulk discounts
An unexpected increase in the prices charged by a supplier
Market shortage of materials
Unexpected buying costs, such as high delivery costs
Efficient or inefficient buying procedures
A change in material quantity, resulting in either higher or lower purchase prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the causes of a materials usage variance?

A

Change to the rate of scrap or wastage
Using a different quality of material could affect wastage rate
Defective materials
Better/worse quality control
More/less efficient work procedures
Changes to production methods or product design

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How to calculate labour rate variance?

A

Actual hours paid x Actual rate (AHp AR)

Actual hours paid x Standard rate (AHp SR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How to calculate labour idle time?

A

Actual hours paid x Standard rate (AHp SR)

Actual hours worked x Standard rate (AHw SR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How to calculate labour efficiency variance?

A

Actual hours worked x Standard rate (AHw SR)

Standard Hours x Standard Rate (SH SR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How do you calculate idle time variance?

A

(Actual Hours paid - Actual Hours worked) x Standard Rate

This is always adverse

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What causes a labour rate variance?

A

Unexpected increase in basic rate of pay
Payments of bonuses
Changes to labour mix resulting in using labour that is more or less experienced that the ‘standard’
Labour shortages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What causes a labour efficiency variance?

A

Changes to labour motivation
Changes to labour mix resulting in using labour that is more or less experienced that the ‘standard’
Improved working methods
Industrial action by the work force
Poor supervision
A ‘learning effect’ amongst the work force

17
Q

What causes a labour idle time variance?

A

Unexpected lost time due to production bottlenecks and resource shortages
Machine breakdowns
Strike action
Lack of sales/production
Machine set-ups
Seasonal demand

18
Q

How do you calculate variable overhead expenditure variance?

A

Actual hours worked x Actual rate (AHw AR)

Actual hours worked x Standard rate (AHw SR)

19
Q

How do you calculate variable overhead efficiency variance?

A

Actual hours worked x Standard rate (AHw SR)

Standard hours x Standard rate (SH SR)

20
Q

What causes overhead expenditure variances?

A

Changes in machine running costs

21
Q

What causes overhead efficiency variances?

A

Causes similar to those for a direct labour efficiency variance

22
Q

How do you calculate the fixed overhead expenditure variance?

A

Actual fixed overhead cost

Budgeted fixed overhead cost (BQ x FOAR per unit)

23
Q

How do you calculate the fixed overhead volume variance?

A

Budgeted fixed overhead cost (BQ x FOAR per unit)

Standard fixed overhead cost for actual output (AQ x FOAR per unit)

24
Q

What type of costing causes a fixed overhead volume variance?

A

Absorption

25
Q

What are the two variance you calculate to split the fixed overhead volume variance?

A

Capacity variance
Efficiency variance

26
Q

How do you calculate the fixed overhead capacity variance?

A

Budgeted fixed overhead cost (BH x FOAR per hour)

Actual hours x fixed overhead absorption rate (AH FOAR per hour)

27
Q

How do you calculate the fixed overhead efficiency variance?

A

Actual hours x fixed overhead absorption rate (AH FOAR per hour)

Standard fixed overhead cost for actual output (SH x FOAR per hour)

28
Q

What are the causes of a fixed overhead expenditure variances?

A

Spending in excess of the budget

29
Q
A