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Standard Costing and Variance Analysis

Formula of Standard Costing and Variance Analysis

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366 views11 pages

Standard Costing and Variance Analysis

Formula of Standard Costing and Variance Analysis

Uploaded by

Md Azim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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A General Model for Variance Analysis

Variance Analysis

Price Variance Quantity Variance

Materials price variance Materials quantity variance


Labor rate variance Labor efficiency variance
VOH spending variance VOH efficiency variance

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

Actual quantity is the amount of direct


materials, direct labor, and variable
manufacturing overhead actually used.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

Standard quantity is the standard quantity


allowed for the actual output for the period.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

Actual price is the amount actually


paid for the for the input used.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

Standard price is the amount that should


have been paid for the input used.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity


× × ×
Actual Price Standard Price Standard Price

Price Variance Quantity Variance

(AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP)


AQ = Actual Quantity SP = Standard Price
AP = Actual Price SQ = Standard Quantity

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


Instructions:

You can solve the problems by using above


methods.
Or
You can use formula which are available in the
next slides.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


Material Variances:
Using the Factored Equations

Formula Method:
Materials price variance
MPV = AQ (AP - SP)
Materials quantity variance
MQV = SP (AQ - SQ)

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


Labor Variances:
Using the Factored Equations

Labor rate variance


LRV = AH (AR - SR)
Labor efficiency variance
LEV = SR (AH - SH)

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.


Variable Manufacturing Overhead
Variances: Using Factored Equations

Variable manufacturing overhead spending variance


VMSV = AH (AR - SR)
Variable manufacturing overhead efficiency variance
VMEV = SR (AH - SH)

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

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