Lecture 9- Variance Analysis

Question 1

What are the different types of standard costs?

Answer 1

• BASIC standards remain static from year to year.
• IDEAL standards assume nothing will go wrong and be 100% perfect all the time. Sometimes used, but despondency can set in.
• ATTAINABLE standards demand EFFICIENT, not perfect working and should be used according to theory.

Question 2

How do you calculate the material price variance?

Answer 2

standard cost less actual cost times actual quantity

Question 3

How do you calculate the materials quantity variance?

Answer 3

standard quantity less actual quantity times standard price.

Question 4

How does labour variance compare to materials variance?

Answer 4

We use different terms; labour rate (not price) and labour efficiency (not usage).

Question 5

How do we calculate the fixed overhead volume variance?

Answer 5

The FIXED OVERHEAD VOLUME VARIANCE is (Actual production – Budgeted production) x Standard rate (product).

Question 6

How do we calculate the FIXED OVERHEAD VOLUME CAPACITY VARIANCE?

Answer 6

Actual hours – Budgeted hours) x Standard rate (hour

Question 7

How do we calculate the FIXED OVERHEAD VOLUME EFFICIENCY VARIANCE?

Answer 7

Standard hours – actual hours) x standard rate (hour)

Question 8

How do we calculate the TOTAL SALES MARGIN VARIANCE?

Answer 8

actual contribution – budgeted contribution

Question 9

How do we calculate the SALES MARGIN PRICE VARIANCE?

Answer 9

actual margin – standard margin) x actual volume.

Question 10

How do we calculate the SALES MARGIN QUANTITY VARIANCE?

Answer 10

actual volume – budgeted volume) x standard margin