Lecture 1 Flashcards
Total Materials variance
Standard cost – Actual cost
Materials Price variance
(Standard price- Actual price) (Actual quantity)
Favourable-Surplus of Mat, Good price)
Adverse-(Could be due to shortage of supplies, poor negotiation, high levels of inflation)
Materials usage variance
(Standard Quantity-Actual quantity) Standard price
Favourable-Skilled workers
Adverse-Unskilled workers, Poor quality of materials
Direct Labour Total Variance
Standard Cost-Actual cost
Direct Labour rate variance
(Standard rate- Actual rate) (Actual hours)
Favourable-Poor negotiation by worker, Cheap labour.
Adverse- Overpaying, etc.
Direct labour efficiency variance
= (Standard hours- Actual Hours) (Standard rate)
Favourable-Motivated, Well supervised
Adverse-Poor supervision, Poorly motivated
• Fixed overhead expenditure variance
=BFO – AFO
• Fixed overhead absorption rate
=Budgeted overhead/Budgeted labour hours
FOAR (Fixed overhead activity rate)
= (Annual budgeted fixed overheads/Annual budgeted activity)
Volume efficiency variance
=(SH for actual production – AH)SR
Volume capacity variance
=(AH-BH)SR
