Variance Analysis

Variable overhead efficiency variance is the difference between actual hours worked at standard rate/price and standard hours allowed on standard rate/price. The standard hours are the total number of hours required by the company’s standard hours of the specific product to complete the production target during a particular period. For example, the standard labor hours […]

The direct labor variance is the difference between the actual labor hours used for production and the standard labor hours allowed for production on the standard labor hour rate. From the definition, you can easily derive the formula: Direct Labor Efficiency Variance = (Actual Labor Hours – Budgeted Labor Hours) Labor efficiency variance compares the

The difference between actual variable manufacturing overhead incurred during the period and actual hours worked during the period on the standard variable overhead rate is known as overhead spending variance. You will get favorable or unfavorable results from the calculation of the overhead spending variance formula. If your company’s manufacturing overhead is higher than the

The difference between the actual direct rate and standard labor rate is called direct labor rate variance. Direct labor variance is a management tool to compare the budgeted rate set for direct labor at the start of production with the actual labor rate applicable during the production period. Management can revise their budgeted rate if

Introduction Sales volume variance is used to measure the effect on the profit or contribution margin of the difference between the actual quantity sold and the budgeted sales quantity that is the quantity decided to be sold prior to actual sales. In absorption costing the variance shows the impact on the profit whereas in marginal

Sales Price Variance occurs when the actual selling price of a commodity or service differs from the standard selling price set by the management, which is an estimated selling price decided beforehand. It is not possible that businesses will always attain the standard and budgeted sales data. The actual price can vary due to market

Definition: Fixed overhead spending or expenditure variance is the difference between actual fixed overheads incurred by the company and the budgeted fixed overheads that were estimated by the company before the year started. It can be calculated as follows: Actual overheads – budgeted overheads = Fixed overhead spending variance Analysis: A favorable fixed overhead spending

Variable Overhead Spending Variance: Variable overheads are indirect variable expenses i.e. they can’t be traced back to one unit of production; depreciation expense of plant and machinery, for example. Variable Overhead Spending Variance is the deviation in the expense incurred regarding variable overheads than what was expected. It calculates the difference between actual variable overheads

Variable overhead efficiency variance: A variable overhead efficiency variance exhibits the difference between budgeted variable overheads and applied variable overheads. In other words, it is the difference between standard hours and actual hours worked at the standard variable overhead rate. It helps identify the cost saved or incurred by the company due to efficiency or

Fixed overhead total variance: A variance is a difference between actual cost/revenue and budgeted cost/revenue. Fixed overhead total variance measures the difference between actual fixed overheads and absorbed fixed overheads. Absorbed or applied overheads are defined as the fixed overheads that the company was able to recover. They are calculated by applying the fixed overhead