Variances Flashcards
Sales price variance
(how much of the variance is due to not achieving budgeted price?)
(Actual sales volume * Budget sales price) - Actual sales revenue
Sales volume variance
(how much of the variance is due to lack of sales volumes?)
(Actual volume - Budgeted volume) x value
Sales Mix variance
(When is it used?)
It is used where a responsibility centre makes several different products each with different contributions
Sales Mix variance
(What can value be in the below sales mix variance formula?)
(Actual sales volume pre product line * budget value per budget line) - Budgeted value
Value can be either
* The standard profit per unit (Absorption costing)
* Standard contribition per unit (Marginal costing)
What is the general approach for cost variances?
The general approach is to look at price and efficiency variances and the total amount will be the total difference between the amount budgeted and the amount paid.
Direct material total variance
(how much of the total variance is due to overspending on materials?)
(Actual volume x Standard material cost) - Actual cost of materials
Direct Material cost/price variance
(How much of the variance is due to paying too much for materials)
(Budgeted material cost per unit - Actual cost per unit) x Actual quantity used.
Direct Material usage variance
(How much of the variance is due to using too much materials and allowing waste?)
(Standard use - Actual use) x Standard material price
Direct Labour Total Variance
(How much of the variance is due to overspending on labour?)
(Actual sales volume x Standard labour cost) - Actual cost of labour
Direct Labour Cost/Rate Variance
(How much of the variance is paying too much for labour?)
(Standard rate per hour - Actual rate per hour) x Actual hours of labour used
Direct Labour usage/efficiency variance
(How much of the variance is due to using too much labour and allowing idle time?
(Standard hours - actual hours) x Standard rate per hour
