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Cost and Management Accounting Variance Analysis

S Standard ; A Actual; P- Price Q Quantity; O- Output; R- Rate; T time

1. Direct Material Cost Variance


y Direct Material Cost Variance = Std Material cost of actual output Actual Material Cost OR = (SP x SQ for actual output) (AP X AQ)  Std Cost for actual output = Std Cost per unit x Actual output  SQ for actual output = Std Quantity per unit x Actual output OR  SQ for actual output (if more than one material is used) = (Standard Input/Standard output)Actual output o Direct Material Price Variance = AQ used (SP AP) o Direct Material Usage Variance = SP (SQ for actual output-AQ)  Direct Material Mix Variance = SP (Revised SQ AQ) ; y Revised SQ = (Total wt of actual mix/Total wt of std mix) SQ  Direct Material Yield Variance = Std Cost per unit (SO for actual mix - AO) y Standard Cost per unit = SQ per unit x SP Or Total std cost/Std Output  Std output for actual mix = (Total wt of actual mix/ Total wt of std mix)std output

2. Direct Labour Cost Variance


y Direct Labour Cost Variance = Std Labour cost of actual output Actual Labour Cost = (SR x ST for actual output) (AR x AT) o Direct Labour Rate Variance = AT (SR AR) OR

o Direct Labour Efficiency (Time) Variance = SR (ST for actual output AT) y ST for actual output (many grades/types of labourers) = (Std Hours/Std output)Actual output  Direct Labour Mix Variance = SR(Revised ST AT) y Revised ST = (Total AT/Total Std Time) ST  Direct Labour Yield Variance= Std Cost per Unit (SO for actual mix AO) y SO for actual mix = (Actual mix in hrs/std mix in hours)std output

3. Overhead Cost Variance


y Overhead Cost Variance = Recovered OHs- Actual OHs o Recovered Overheads = Std OH rate per hour x Std hrs for actual output OR = Std OH rate per unit x Actual output    Std OH rate per hour = Budgeted OH/Budgeted hours Std OH rate per unit = Budgeted OH/Budgeted output Std hrs for actual output = (Budgeted hrs/Budgeted output)Actual output

Overhead Cost variance = Variable OH cost variance + Fixed OH Cost variance

Variable OH Cost Variance = Recovered Variable OH Actual Variable OH o Variable OH Expenditure Variance = AT (Std Vari OH rate per hour Actual Vari OH rate per hour)  Std Vari OH rate per hour = (Budgeted Vari OH/Budgeted hours) OR = Std OH rate per hour Std fixed OH rate per hour

o Variable OH Efficiency Variance  Std Vari OH rate per hour(Std hours for Actual production Actual Hours) y Fixed OH Cost Variance o Fixed OH Expenditure Variance  (Std Fix OH rate per hour x Budgeted Hrs) (Actual Fix OH rate per hour x Actual hrs)  Std Fix OH rate per hour = (Budgeted Fix OH/Budgeted hours) OR = Std OH rate per hour Std Vari OH rate per hour o Fixed OH Volume Variance  Fixed OH Efficiency Variance y Std Fix OH rate per hour (Std hours for Actual production Actual Hours)  Fixed OH Capacity Variance o Std Fix OH rate per hr (Actual hrs for Actual production Budgeted Hrs)

4. Sales Variances
y Sales Variances with reference to turnover y Value variance = Budgeted Sales Actual Sales o Price variance = AQ sold (SP AP) o Volume Variance = SP (Budgeted Qty AQ)  Mix variance = SP (Revised SQ- AQ) y Revised SQ = (total qty of actual mix /Total qty of std mix) SQ  Quantity variance = Budgeted Sales Revised Std sales y Revised Std sales = Revised SQ x SP Sales Variances with reference to Profit y Value variance = Budgeted Profit Actual Profit o Price variance = AQ sold (Std Profit per unit Actual Profit per unit) o Volume Variance = Std rate of Profit per unit (Budgeted Qty AQ)  Mix variance = Revised Std Profit Std Profit  Quantity variance = Budgeted Profit Revised Std Profit