Variance Analysis Chapter 10.

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Presentation transcript:

Variance Analysis Chapter 10

Total Quantity X price Material Costs Total Quantity = good units X Standard Qty per unit

Total Hours X Rate per hr Labor Costs Total Hours X Rate per hr Good units X hours per unit = total hrs

Material Variances Price Variance Quantity Variance Favorable variance is positive number Unfavorable variance is a negative num.

Price Variance Difference in Price X Actual Quantity Difference in Price is: Standard Price – Actual Price Actual Price is Total Cost/Quantity

Quantity Variance Difference in Quantity X Standard Price Standard Quantity – Actual Quantity Exercise 10-2 Page 455 Worksheet

Direct Labor Variances Rate Variances Efficiency (Hours) Variance

Rate Variances Difference in rate X Actual hours Difference is Standard Rate – Actual Rate

Efficiency Variance Difference in hours x Standard rate Difference = Standard hour from Actual Hours Exercise 10-3 Page 455

Truisms Lower Price – Lower Quality- more quantity – more hours Higher price-higher quality-less quantity- less hours Higher skilled labor-requires less hours- higher rate Lower skill labor-requires more hours- lower rate

Other reasons for variances Quantity Discount Quality better or worse Standard do not reflect current changes

Exercise 10-9 Material and Labor Variance Application of Truisms