Standard Costing

Question 1

Labour variances

Answer 1

Labour rate
Can be split into planning and operating variances
Can be due to increased wage rates or more overtime used

Labour efficiency
Can be due to change in quality of goods, increased idle time, new staff inexperienced

Question 2

Variable overhead variance

Answer 2

Variable overhead expenditure
due to different cost of oh than budget
Can be due to increased overhead costs. Quality changes increasing inspections

Voh efficiency
Due to different hours used. Quality causing more labour hours. Machine old and used more time

Question 3

Foh variances

Answer 3

Fixed overhead expenditure variance
Due to different cost than budget.
Increase in fc

Foh volume variance
Only if use absorption costing. Due to over or under allocation of foh. If use direct labour hours or machine, can split into capacity and efficiency

Question 4

Sales variances

Answer 4

Use profit margin for abs and contribution margin for var.

Sales price margin variance
Due to change in sp.

Sales margin volume variance
Can be split into
Qty. due to different amount of units sold. Can be spilt into market size and market share.
Mix. Due to different ratio of units sold

Question 5

Disposition of variances

Answer 5

Favorable are prorated to ensure inventories not above cost.
Abnormal adverse. Expensed
Permanent adverse. Pro rate.
Foh volume. Adverse expense in period incurred. Favorable pro rate

Question 6

Material variances

Answer 6

Material price variance
SP-ap) aq
Can be split into planning and operating variance
Can be due to change in supplier and change in quality of materials bought.

Material usage variance
Can be split into mix and yield variance
Yield would be the variance due to different amounts of inputs used
Mix would be due to different ratios of inputs used
Could be due to change in quality of wastes and theft