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Operating Statement (Absorption Costing) Sales Variances

This document outlines the calculation of variances in an absorption costing operating statement. It includes variances for sales price, sales volume, material price and usage, labor rate and efficiency, overhead expenditures and efficiencies. Actual profit is calculated as actual units multiplied by the actual profit per unit. There are also variances calculated for material and labor mixes and yields, as well as sales mix and quantity profit margins. Notes provide guidance on how to calculate quantities for the different variances.

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Hushnak Ali
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51 views2 pages

Operating Statement (Absorption Costing) Sales Variances

This document outlines the calculation of variances in an absorption costing operating statement. It includes variances for sales price, sales volume, material price and usage, labor rate and efficiency, overhead expenditures and efficiencies. Actual profit is calculated as actual units multiplied by the actual profit per unit. There are also variances calculated for material and labor mixes and yields, as well as sales mix and quantity profit margins. Notes provide guidance on how to calculate quantities for the different variances.

Uploaded by

Hushnak Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Operating Statement (Absorption Costing)

Budgeted Profit Budgeted Units * Standard Profit / Unit


Sales Variances F A
Sales Price Variance AS (ASP - SSP) XXXX XXXX
Sales Volume Profit Margin Variance SPM (AS - BS) XXXX XXXX
Cost Variances
Material Price Variance AQ (AP- SP) XXXX XXXX
Material Usage Variance SP ( AQ - SQ) XXXX XXXX
Labor Rate Variance AH (AR - SR) XXXX XXXX
Labor Efficiency Variance SR (AH - SH) XXXX XXXX
Idle Time Variance Idle hours * SR XXXX XXXX
Variable O/H expenditure variance AH (AR - SR) XXXX XXXX
Variable O/H efficiency variance SR (AH - SH) XXXX XXXX
Fixed O/H expenditure variance AHAR - BHSR XXXX XXXX
Fixed O/H Capacity Variance BHSR - AHSR XXXX XXXX
Fixed O/H efficiency Variance AHSR - SHSR XXXX XXXX

Actual Profit Actual Units * Actual Profit / Unit

Material Mix Variance (AQAM - AQSM) * SP


Material Yield Variance (AGSM - SQSM) * SP
Labor Mix Variance (AHAM - AHSM) * SR
Labor Yield Variance (AHSM - SHSM) * SR
Sales Mix Profit Margin Variance (ASAM - ASSM) * SPM
Sales Quantity Profit Margin Variance (ASSM - BSSM) * SPM

Notes:
Material Variances
For price variance use quantity purchased and for quantity variance use quanity used
Labor Variances
For rate variance use labor hours paid and for efficiency variance use labor hours worked.
Variable Overhead Variances
As VOH is based on labor so use same hours as of labor and then multiply with overhead rate
Fixed Overhead Variances
capaicty variance is the difference between actual and budget hours/units
efficiency variance is the difference between actual and standard hours/units
actual hours/units more than budgeted is favorable
actual hours/units more than standard is unfavorable
General Points
for SQ and SH multiply Actual Units with SQ/SH?unit
for BH multiply budgeted Units with SQ/Unit
for Budgeted Profit multiply Budgeted Units with Standard Profit / Unit
In case marginal costing system is used, then calculate only one variance for FOH (expenditure variance)
and use Standard CM instead of Standard PM
Ovearhead Absorption Rate = Budgeted Overheads / Budgeted Hours
XXXX

XXXX

XXXX

XXXX

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