VARIANCE ANALYSIS

ANALYSIS OF MANUFACTURING COSTS

Sales volume variance = (flexible budget units - static budget Units) * (budgeted contribution margin per unit)
Flexible budget variance = Actual - Flexible Budget
Static budget variance = Static budget actual results
Direct Materials Efficiency Variance = [standard quantity for actual output actual quantity for actual output] *
standard price for materials
Direct Materials Price Variance = [standard price actual price] * quantity purchased
Price variance = (Actual unit price - Standard unit price) * Actual units purchased
For labor, sometimes called rate variance.
Efficiency variance = (Inputs actually used - Inputs that should have been used) * Standard unit price of inputs
For materials, sometimes called quantity variance or usage variance
Variable overhead efficiency variance = (actual units of allocation based used - units of allocation base that should
have been used) * budgeted rate per unit of allocation base
Variable overhead spending variance = Actual cost - (actual inputs * budgeted rate) =
(Flexible-budget variance - efficiency variance)
Fixed overhead spending variance = Flexible budget variance for fixed overhead = Actual cost - budgeted cost
Fixed overhead production volume variance = (denominator volume in units of standard inputs - units of standard
inputs allowed for actual outputs) * budgeted fixed overhead rate per unit of standard inputs
OR

= (denominator volume in product units - actual outputs in product units) * budgeted fixed overhead rate per
product unit
Also called capacity variance, activity variance, denominator variance, idle capacity variance or
volume variance

Direct material yield variance = (actual units of material inputs used - standard units of material inputs allowed for
actual outputs) * standard average price per unit of material inputs
Direct materials mix variance = [(actual material mix percentage - standard material mix percentage) * actual total
units of material inputs used] * [standard individual price per unit of materials inputs - standard average price
per unit of material inputs]
Direct labor yield variance = (actual units of labor inputs used - standard units of labor inputs allowed for actual
outputs) * standard average price per unit of labor inputs
Direct labor mix variance = [(actual labor mix percentage - standard labor mix percentage) * actual total units of
labor inputs used] * [standard individual price per unit of labor inputs - standard average price per unit of
labor inputs]

SALES AND MARKETING VARIANCES

Sales quantity variance = (Actual sales volume in units - static budgeted sales volume of individual product in units)
* budgeted average contribution margin per unit
Sales mix variance = [(Actual sales mix percentage - budgeted sales mix percentage) * actual total sales volume of all
products in units] * [budgeted individual contribution margin per unit - budgeted average contribution margin
per unit]
Market size variance = Budgeted market share percentage * (Actual industry sales volume in units - budgeted
industry sales volume in units) * budgeted average contribution margin per unit
Market share variance = (actual market share percentage - budgeted market share percentage) * actual industry sales
volume in units * budgeted average contribution margin per unit
PROJECT VARIANCES:
Project cost variance = Actual cost of work performed to date - budgeted cost of work performed to date
Project schedule variance = Budgeted cost of work scheduled to date - budgeted cost of work performed to date

Cost of goods sold manufacturing

Beginning inventory raw materials
+ Purchases of raw materials
+ Freight-in
= Raw materials available
Ending inventory raw materials
= Raw materials used in production
+ Direct labor
+ Factory overhead
= Manufacturing costs
Beginning work-in-process inventory
+ Manufacturing costs
Ending work-in-process inventory
= Cost of goods manufactured
Beginning inventory finished goods
+ Cost of goods manufactured
= Goods available for sale
Ending inventory -- finished goods
= Cost of goods sold