Variances in Formula Format ‘The following abbreviations are used: AFOH = actual fixed overhead AM = actual mix AP = actual price or rate AQ = actual quantity or hours AVOH = actual variable overhead BFOH = budgeted fixed overhead (remains at constant amount regardless of activity level as long as within the relevant range) SM = standard mix SP = standard price SQ = standard quantity TAOH = total actual overhead Material price variance = (AP x AQ) — (SP x AQ) Material quantity variance — (SP x AQ) — (SP x SQ) Labor rate variance = (AP X AQ) — GP x AQ) Labor efficiency variance = (SP X AQ) — (SP X SQ) Four-variauce approach: Variable OH spending variance = AVOH — (VOH rate x AQ) Variable OH efficiency variance = (VOH rate x AQ) — (VOH rate x SQ) Fixed OH spending variance = AFOH — BFOH Volume variance = BFOH — (FOH rate X SQ) Three-variance approach: Spending variance = TAOH — [(VOH rate x AQ) + BFOHI Efficiency variance = ((VOH rate X AQ) + BFOH)] — [(VOH rate X SQ) + BFOHI Volume variance = [(VOH rate X SQ) + BFOH] — [(VOH rate x SQ) + (FOH rate X SQ) (This is cqual to the volume variance of the four-variance approach.) Two-variance approach: Budget variance = TAOH — I(VOH rate X SQ) + BFOH] Volume variance = [(VOH rate x SQ) + BFOH] — [(VOH rate x SQ) + (FOH rate X SQ) (This is equal to the volume variance of the four-variance approach.) One-variance approach: ‘Total OH variance = TAOH — (Combined OH rate x SQ) MULTIPLE MATERIALS: Material price variance = (AM x AQ x AP) ~ (AM x AQ x SP) Materials mix variance = (AM x AQ x SP) ~ (SM x AQ x SP) Materials yield variance = (SM x AQ x SP) ~ (SM x SQ x SP) MULTIPLE LABOR CATEGORIES: Labor rate variance = (AM x AQ x AP) ~ (AM x AQ x SP) Labor mix vatlance = (AM x AQ x SP) — (SM x AQ x SP) Labor yiels variance = (SM x AQ x SP) ~ (SM x SQ x SP)VARIANCES IN DIAGRAM FORMAT: Direct Materials and Direct Labor ‘Actual Prive x Actual Quantity Purchased Standard Price x ‘Actual Quanity Purchased ‘Standard Price x ‘Actual Quantty Used ‘Material Price Variance ‘Standard Price x Standard Quanity Allowed ‘Materal Quantity Variance Actual Prico x ‘Actual Quantity Used ‘Standard Price ‘Actual Quantity Used “Total Material Variance ‘Standard Price = ‘Standard Quantty Allowed ‘Waterial Price Variance Material Quantity Variance ‘Actual Price x ‘Standard Price x ‘Standard Price ‘Actual Quantity of Actual Quantity of Standard Quanity of Hours Worked Hours Worked Hours Allowed Total Labor Variance Taber Rate Variance: Tabor Effciency Variance: Overhead four-variance approach: Variable Overhead Applied VOH VOH Rate x Standard Quantity &) ‘VOH Efficiency Varance ‘Actual OH OH Rate x Actual Quantity @ ‘OH Spending Variance “Total Variable OH Variance Fixed Overhead Applied FOH ‘Actual FOH Budgeted FOH © FOH Rate x Standard Quantity @ FOH Sperding Vanance ‘Volume Variance Total Fixed OH VarianceOverbead one, two-, and three-variance approaches: Actus Actual VOH + Actual FOH @+o Budget Based on Input Hours VOH Rate x AG + Budgeted FOH Budget Based ‘on Output Hours VOH Rate x SQ + Budgeted FOH ib) Applied VOH Rate x SO 4+ FOH Rale x SO ‘Spending Variance @ @+O +O. ‘Budget Variance Efficiency Variance ‘Volume Variance @ ‘volume Variance @+O+O+@ Total Overnead Variance (Total Under/Gverapplied Overhead) Mix and Yield Variances MULTIPLE MATERIALS: Actual Mix 3 ‘Actual Quantity ye Actual Price ‘Actual Mix Xctual Quantity & Standard Price ‘Standard Mix ‘Actual Quantity x Standard Price Standard Mic x ‘Standard Quanity % Standard Price Material Price Varance ‘Material Mix Variance ‘Waterial Vied Variance MULTIPLE LABOR CATEGORIES: Actual Mix x ‘Actual Mix Standard Mix x ‘Standard Mix x ‘Actual Hours > Actual Hours > ‘Actual Hours > ‘Actual Rate ‘Standard Rate ‘Standard Rate Standard Hours x Standard Rate Tabor Rate Varince Tabor Mix Variance Taber Vield Variance