Variance Analysis

Question 1

Model for variance analysis

Answer 1

A.A.S

A.S.S

Question 2

Standard price

Answer 2

Is the amount that should have been paid for the resources required for unit

Question 3

Standard quantity

Answer 3

Is the total quantity allowed for the actual good output

Question 4

Quantity variance

Answer 4

The difference between the actual quantity of inputs used at the standard price and the standard quantity of inputs a load for the actual output at the standard price.
The standard quantity allowed for the actual output equals the amount of the input that should have been used to produce the actual output of the period. It is computed by multiplying the standard quantity of input/unit of output by the actual output

Question 5

Direct material standards

Answer 5

The standard price per unit for direct materials should reflect the final delivered cost of the materials net of any discount taken.
The standard price equals a particular grade of material purchased in particular lot sizes and delivered by particular type of carrier

Question 6

Price standards

Answer 6

Final, delivered cost of materials, net of a discount

Question 7

Price variance

Answer 7

The difference between actual quantity of inputs at the actual price and the actual quantity of inputs at the standard price.
For the material price variance actual quantity of inputs ordinarily refers to the actual quantity of inputs purchased which may differ from the actual quantity of inputs used

Question 8

Quantity standards

Answer 8

The standard quantity of direct materials/a unit of output reflects the amount of material going into each unit of Finnish products, as well as an allowance for unavoidable waste, spoilage, and other normal inefficiencies

Question 9

Quantity standards

Answer 9

Use product design specifications

Question 10

Direct direct material price variance

Answer 10

Difference between what is paid for a given quantity of materials and what should have been paid according to the standard.
Most firms compute the material price variance when materials are practised rather than when the materials are placed into production.
The purchasing manager has control over the place to be paid for goods and is therefore responsible for any price variance

Question 11

Direct material quantity variance

Answer 11

The material quantity variance is the difference between the quantity of materials used in production and the quantity that should’ve been used according to the standard. The material considerations is the responsibility of the production department. There may be times when The purchasing department is responsible for an unfavourable material quantity theory and is due to the practice of inferior quality materials

Question 12

Direct labour rate variance

Answer 12

Labour rate variance measures any deviation from standard and the average hourly rate paid to direct labour workers

Question 13

Direct labour efficiency variants

Answer 13

Basic concept of direct labour efficiency variance is similar to that of direct material quantity variance.
The measure of difference between the standard rate of actual number of direct labour hours utilised during a period and the standard hours of direct labour for the level of output achieved