Variance Analysis Flashcards
What are variances?
Difference between a planned or budgeted cost (or revenue) and the actual incurred.
What are favourable and adverse variances?
Favourable gives higher than expected profits, adverse gives lower
What can variance analysis provide information for?
Cost control
Reconciliation between budgeted and actual
Performance appraisal
How to calculate direct material variance?
Actual production x standard quantity x standard price
Actual quantity x actual price
= variance
How to calculate direct material price variance?
Actual purchases x standard price
Actual purchases x actual price
= variance
How to calculate direct material usage variance?
Actual production x standard usage Actual production x actual usage = usage variance in kg x standard cost per kg = variance
What do we always assume in direct material variances?
Price variance plus the usage variance will equal the total variance when the quantity purchased equals the quantity used
How to calculate direct labour variance?
Actual production x standard hours x standard rate
Actual hours paid x actual rate
= variance
How to calculate direct labour rate variance?
Actual hours paid x standard rate
Actual hours paid x actual rate
= variance
How to calculate direct labour efficiency variance?
Actual production x standard hours Actual hours worked = efficiency variance in hrs x standard rate per hour = direct labour efficiency variance
How to calculate sales volume variance?
Budgeted sales Actual sales = volume variance in units x standard profit per unit = variance
How to calculate sales price variance?
Actual sales volume x standard price
Actual sales volume x actual price
= variance
How to calculate total variable overhead variance?
Actual production x standard hours x standard rate
Actual hours paid x actual rate
= variance
How to calculate variable overhead expenditure variance?
Actual hours worked x standard rate
Actual hours paid x actual rate
= variance
How to calculate variable overhead efficiency variance?
Actual production x standard hours Actual hours worked = efficiency variance in hours x standard rate per hour = variance
