Types of variances

Question 1

Materials variance (overall)

Answer 1

The difference between the expected material cost for the actual number of units produced and the actual material cost.

Question 2

material price variance?

Answer 2

The standard cost for the actual quantity of material used versus the actual cost for the actual quantity of material used 

Question 3

Material usage variance

Answer 3

The standard material quantity for the actual volume of units produced versus the actual quantity of material used multiplied by the standard cost per unit of material

Question 4

Labour variances (overall)

Answer 4

The standard cost of labour for the actual quantity of units produced versus the actual cost of labour 

Question 5

Labour rate variance

Answer 5

The standard rate for the actual number of hours worked versus the actual cost of labour worked 

Question 6

Labour efficiency variance

Answer 6

The standard number of hours for the actual volume of products produced versus the actual number of hours worked multiplied by the standard labour rate

Question 7

Idle time variance

Answer 7

The number of hours worked versus the number of hours paid multiplied by the standard labour rate 

Question 8

Variable overheads, variances (total)

Answer 8

Standard variable overheads per unit for actual volume, reduce versus actual variable overheads

Question 9

Variable overhead, efficiency variance

Answer 9

Actual volume multiplied by standard hours per unit versus actual number of hours use multiplied by variable overheads per hour 

Question 10

Variable overhead expenditure, variance

Answer 10

Actual hours worked multiplied by standard variable overheads per hour versus actual overheads incurred 

Question 11

Fixed overhead variance

Answer 11

Actual volume at standard O.A.R. versus actual fixed overheads

Adverse variance, when overheads have been under absorbed

Question 12

Fixed overhead expenditure variance

Answer 12

Actual overheads versus budgeted overheads

Adverse when actual overheads are higher than budgeted

Question 13

Fixed overhead, volume variance

Answer 13

Budgeted volume versus actual volume multiplied by standard OAR

Favourable when more units are produced than budgeted

Question 14

Fixed overhead capacity variance

Answer 14

Budget of hours versus actual hours multiplied, by fixed overhead absorption rate per hour

Question 15

Fixed overhead, efficiency variance

Answer 15

Standard hours for actual volume produced versus actual hours multiplied by overhead absorption rate per hour

Question 16

Sales mix variance

Answer 16

Difference between a standard mix of actual sales volume and the actual mix of actual sales volume valued at the standard profit/contribution 

Question 17

Sales quantity variance

Answer 17

Difference between the actual sales volume at standard mix and the budgeted volume value at the standard profit/contribution 

Question 18

Operational variance

Answer 18

Classification of variance, in which non-standard performance is defined as being that which differs from an ex – post standard.

Question 19

Planning variance

Answer 19

Compare an original standard with a revised budget that should or would’ve been used if planner had known in advance what was going to happen.

Classification of variance is caused by ex ante budget allowances being changed to an ex-post basis

Known as revision, variances 

Question 20

Sales, volume variance

Answer 20

Difference between actual an expected number of units multiplied by the budgeted price/profit/contribution

Question 21

Market size variance

Answer 21

The sales volume planning variance

Question 22

Market share variance

Answer 22

The sales volume operational variance 

Question 23

Reasons for calculating planning variances

Answer 23

Planning variances will become the responsibility of more senior managers

Operational managers will not be able to blame adverse results on poor budgeting