Variances

Question 1

Material Variance

Answer 1

1. Material Price Variance
   = AQ x SC – AQ x AC
2. Material usage/quantity variance
   = SC x (SQ – AQ)

Total Material Variance
= Standard Cost - Actual Cost

Question 2

Labour Variance without idle

Answer 2

1. Labour Rate Variance
   = SR x AH – AR x AH

(ii) Labor efficiency variance [LEV]
= SR x SH – SR x AH

Question 3

Factory Overhead Variable Variance

Answer 3

(ii) VOH expenditure / spending variance
= AH x SR – AH x AR

iii) VOH efficiency variance
= SR x SH – SR x AH

Total VOH
= Spending variance + Efficiency variance

Question 4

Factory Overhead Fixed Variances

Answer 4

Overhead Fixed Variances
= (Actual FOH Fixed) - (Applied FOH Fixed)

ii) Fixed OH expenditure / spending variance
= Budgeted fixed OH – Actual fixed OH

(iii) Fixed OH volume variance
= Applied fixed OH – Budgeted fixed OH

Volume variance can be further analyzed into:
(a) Fixed OH efficiency variance
= SR x SH – SR x AH

(b) Fixed OH capacity variance
= SR x AH – BH x SR

Notes - In case of marginal costing, there is NO fixed OH volume variance

Question 5

Sales Variances

Answer 5

3.1) Sales price variance
= AQ (sale) x Actual price – AQ (sale) x Standard price

3.2) Sales volume variance

(a) Sales profit volume variance [used in case of absorption costing]

= [AQ (sale) – BQ (sale)] x standard profit per unit

(It is used if SCC is prepared on absorption costing)

(b) Sales contribution volume variance [used in case of marginal costing]
= [AQ (sale) – BQ (sale)] x standard contribution per unit