ACYMANS: Standard Costing and Variance Analysis

Standard

A performance benchmark or norm used for planning and control purposes. It specifies the expected costs and quantities needed to manufacture a single unit of product or performa single service.

Standard Cost System

A product costing system that determines product cost by using standards or norms for quantities and/or prices of component elements. It allows actual costs to be compared against norms for control purposes.

Prince Variance (PV)

It represents the difference between the actual price and the standard price of an input, with quantity held constant at the actual amount. We compare the actual costs (AQ AP) to what we should have paid for the actual quantity of input (AQ SP)

Price Variance

(AQ SP) - (AQ AP)

Price Variance

AQ * (SP-AP)

Quantity Variance

We compare the flexible budget (SQ SP) to what we should have paid for the actual quantity of input (AQ SP). Only the quantity of input changes, while the standard price is held constant.

Quantity Variance

(SQ SP) - (AQ SP)

Quantity Variance

SP * (SQ - AQ)

Favorable Variance

when the actual price or quantity amounts are lower than the standard amounts.

Unfavorable Variance

If the actual price or quantity amounts are higher than the standard price or quantity amounts.

Material Price Variance

(AP AQ) - (SP AQ)

Materials Quantity Variance

(SP AQ) - (SQ SQ)

Total Material Variance

(AP AQ) - (SP SQ)

Materials Price Usage Variance

(AP - SP) * AQ USED

Materials Purchase Price Variance

(AP - SP) * AQ PURCHASED

Material Price Variance

Indicates whether the amount paid for material was less than or more than standard price. Purchasing manager is responsible.

Material Quantity Variance

Indicates whether the actual quantity used was less than or more than the standard quantity for the actual output achieved. Production manager is responsible.

Total Material Variance

The summation of the individual variances or can also be calculated by subtracting the total standard cost from the total actual.

Materials Price Variance

If both quantity purchased, and quantity used are given, the basis will be quantity purchased.

Materials Quantity Variance

If both quantity purchased, quantity used are given, the basis will be quantity used.

Mix

Any possible combination of material inputs.

Yield

The quantity of output that results from a specified input.

Material Mix Variance

Measures the monetary effect of substituting a nonstandard mix of materials.

Materials Mix Variance

(Actual mix actual quantity standard price) - (Standard mix actual quantity standard price)

Materials Yield Variance

The difference between the actual total quantity of input and the standard total quantity allowed based on output and uses standard mix and standard prices to determine variance.

Material Yield Variance

(Standard mix actual quantity standard price) - (Standard mix standard quantity standard price)

Labor Rate Variance

(AR AH) - (SR AH)

Labor Efficiency Variance

(SR AH) - (SR SH)

Total Labor Variance

(AR AH) - (SR SH)

Labor Rate Variance

The difference between the actual wages paid to labor for the period and the standard cost of actual hours worked.

Labor Efficiency Variance

Indicates whether the amount of time worked was less than or more than the standard quantity for the actual output.

Total Labor Variance

The summation of the individual variances or can also be calculated by subtracting the total standard cost from the total actual cost.

Labor Mix

Any possible combination of labor inputs.

Labor Yield

The quantity of output that results from a specified input.

Labor Mix Variance

Presents the financial effect associated with changing the proportionate amount of higher or lower paid workers in production.

Labor Mix Variance

(Actual mix Actual Hours Standard Rate) - (Standard Mix Actual Hours Standard Rate)

Labor Yield Variance

Shows the monetary impact of using more or fewer total hours than the standard allowed.

Labor Yield Variance

(Standard Mix Actual Hours Standard Rate) - (Standard Mix Standard Hours Standard Rate)

Variable Spending Variance

Actual VOH (AR AH) - Budgeted VOH (SR AH)

Variable Efficiency Variance

Budgeted VOH (SR AH) - Applied VOH (SR SH)

Total VOH Variance

Actual VOH (AR AH) - Applied VOH (SR SH)

VOH Spending Variance

The difference between total actual variable overhead and the budgeted amount of variable overhead based on actual hours. It is caused by both component price and volume differences.

VOH Efficiency Variance

The difference between budgeted variable overhead based on actual hours and variable overhead applied based on standard hours allowed for the production achieved.

Total VOH Variance

The difference between actual variable overhead costs incurred for the period and standard variable overhead cost applied to the period's actual production or service output.

Spending Variance

Actual FOH - Budgeted FOH

Volume Variance

Budgeted FOH - Standard FOH

Total FOH Variance

Actual FOH - Standard FOH

FOH Spending Variance

The difference between the total actual fixed overhead and budgeted fixed overhead.

Volume Variance

The difference between budgeted and applied fixed overhead. This is also known as the non-controllable variance because managers have the least influence and control, especially in the short run.

Total FOH Variance

The difference between actual fixed overhead costs incurred and standard fixed overhead cost applied to the period's actual production.

Total Overhead Variance (One-Way Variance Analysis)

Actual OH (Actual FOH + Actual VOH) - Applied OH (Standard FOH + VOH Rate * Standard Hours)

Budget Variance / Controllable Variance

Actual OH (Actual FOH + Actual VOH) - Budgeted OH Adjusted for SH (Budgeted FOH + VOH Rate * Standard Hours)

Volume Variance

Budgeted OH Adjusted for SH (Budgeted FOH + VOH Rate Standard Hours) - Applied OH (Standard FOH + VOH Rate Standard Hours)

OH Spending Variance (Three Way Analysis)

Actual OH (Actual FOH + Actual VOH) - BAAH (Budgeted FOH + VOH Rate * Actual Hours)

OH Efficiency Variance

BAAH (Budgeted FOH + VOH Rate Actual Hours) - Budgeted OH Adjusted for SH (Budgeted FOH + VOH Rate Standard Hours)

Volume Variance

Budgeted OH Adjusted for SH (Budgeted FOH + VOH Rate Standard Hours) - Applied FOH (Standard FOH + VOH Rate Standard Hours)

VOH Spending Variance

Actual VOH - (VOH Rate * AQ)

VOH Efficiency Variance

(VOH Rate AQ) - (VOH Rate SQ)

FOH Spending Variance

Actual FOH - Budgeted FOH

Volume Variance

Budgeted FOH - (FOH Rate * SQ)