Variance Flashcards
How is the variance of quantity of sales calculated?
(AQ - SQ) x S contribution
How is variance of sales price calculated?
(AP - SP) x AQ
How is the variance of quantity of direct costs calculated?
(SQ - AQ) x SP
How is the variance of prices of direct costs calculated?
(SP - AP) x AQ
How is FOH calculated?
Budget - actual
How is standard contribution worked out?
Sales price - VC
What impact does sales price increase have on sales volume?
Adverse
What impact does a successful advertising campaign have on sales volume?
Favourable
What impact does labour pay rates have on sales volume?
No impact
How is residual income calculated?
Profit - imputed interest
What is the formula for return on capital?
Profit/CE
What is the formula for divisional profit?
C-F
What must be accounted for when reconciling e the budgeted contribution to the actual contribution?
All sales variances and all marginal cost variances
Are favourable variances are always good for an organisation?
No
Is Variance reporting is the comparison of the actual results with the original budget?
No
What factors affect the decision to investigate a variance?
- Controllability of variance
- Cost of investigation
- Trend of variance
What doesn’t help explain a favourable materials usage variance?
Achieving a lower output volume than budgeted
What effect does discounts were taken from suppliers for early settlement of invoices have on materials price variance?
No impact
What could cause a favourable variable overhead efficiency variance?
Working fewer hours than the flexed labour hours budget predicts
When absorbing variable overheads on the basis of machine hours, the total variable overhead
variance can be worked out by comparing actual variable overheads in a period with the product of
the absorption rate and what?
(Actual output) × (Standard machine hours per unit)