W5 - Standard Costing & Variance Analysis LEARN ALL Flashcards

1
Q

What is variance & the Two types of variance

A

Variance is the difference between actual results and expected results

Favourable variance (F): Actual results better than expected results

Adverse variance (A): Actual results worse than expected results

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2
Q

Variances can be split into 3 categories

A

Variable cost variances:
- Direct material: Material Price Variance & Material Usage Variance
- direct labour
- Variable overhead

Fixed production overhead variances

Sales variance

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3
Q

Material variance formulas

A

Material Price Variance:
Standard price per unit of material - Actual price) x Actual quantity of material purchased

Material Usage Variance:
(Standard quantity of materials for Actual production - Actual quantity used) x Standard price per unit of material

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4
Q

Labour variance formulas
3

A

Total labour variance:
Flex budget’s total labour costs - Actual total labour costs

Labour Rate variance:
(Standard labour rate per hour - Actual labour rate per hour) x Actual number of hours worked

Labour efficiency variance:
Standard number of labour hours for actual production - Actual number of hours worked) x Standard labour rate per hour

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5
Q

Variable Overhead variances
3

A

Total variable overhead variance:

Flex budget’s total VOH Costs - Actual Total VOH Costs

Variable overhead rate variance:
(Standard VOH Rate per hour - Actual VOH Rate per hour) x Actual number of hours worked

Variable overhead efficiency variance:
(Standard number of labour hours for Actual production - Actual number of labour hours worked) x Standard VOH rate per hour

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6
Q

Fixed Overhead Variances

A

Total fixed overhead variance (using absorption costing):
Fixed overhead actually absorbed (standard fixed overhead rate per unit x Actual production) - Actual total fixed overhead

Fixed Overhead Expenditure variance:
Budgeted fixed overheads - Actual fixed overheads

Fixed overhead volume variance:
Budgeted fixed overheads - Fixed overheads actually absorbed (Standard fixed overhead rate per unit x actual production)

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7
Q

Sales variances

A

Sales volume variance:
(Actual sales volume - Budgeted sales volume) x Standard profit

Sales price variances:
(Actual selling price - Budgeted selling price) x Actual sales volume

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8
Q

Operating statements (absorption)

A

Detailed statement:

Budgeted profit:
Sales volume variance

Standard profit on actual sales
Sales price variance
Profit after sales variances
Cost variances

Two columns: Favourable, Adverse
Materials - Price
- Usage
Labour - Rate
- Efficiency
Variable O/H - Rate
- Efficiency
Fixed O/H - Expenditure
- Volume

Actual Profit
Stocks valued at standard absorption cost

Standard statement - Just the difference between budgeted and actual
Standard cost:

Materials
- Price
- Usage

Labour
- Rate
- -Efficiency

Variable o/h:
Rate -
Efficiency -

Fixed o/h:
Rate -
Efficiency -

Actual cost:

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9
Q

Variance analysis under marginal costing -
Main differences from absorption costing
3

A

1) Sales volume variance calculated using standard contribution rather than standard profit
(Actual sales volume - Budgeted sales volume) x Standard contribution

2) Fixed overhead volume variances are all zero (AS WE DO NOT ABSORB IN MARGINAL COSTING)
- only the fixed overheaad expenditure variances will appear in the operating statement

3) All other variances are unchanged

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10
Q

Operating Statement under Marginal Costing

A

Budgeted Contribution
Sales volume variance

Standard contribution on actual sales
Sales price variance
Contribution after sales variances
Cost variances

Two columns: Favourable, Adverse
Materials - Price
- Usage
Labour - Rate
- Efficiency
Variable O/H - Rate
- Efficiency

Actual contribution
Actual fixed O/H

Actual profit
Stocks valued at standard marginal cost

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