1. Variance Analysis Chapter 8

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

3. 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 Difference in Quantity ◦ Standard Quantity – Actual Quantity ◦ Exercise 8-4 Page 368 ◦ 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 8-5 Page 368

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 8-17 pg 372 Material and Labor Variance Application of Truisms