1. Variance Analysis
Chapter 10

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

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

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

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

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

7. Direct Labor Variances
Rate Variances
Efficiency (Hours) Variance

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

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

10. 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

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

12. Exercise 10-9
Material and Labor Variance
Application of Truisms