# Variance Analysis

## Importance and limitation of Direct Labor Rate Variance

Direct Labor Rate Variance: A direct labor rate variance compares the difference between the actual cost and the standard cost of hours utilized by the direct labor. It is calculated as follows: (Actual rate – Standard rate) * Actual hours worked = Direct Labor Rate Variance A variance in cost and management accounting is defined …

## Importance and Limitations of Direct Labor Efficiency Variance

Introduction Variances are calculated to Analyze Company’s planning with actual results. The difference between the actual number of hours per unit and budgeted number of hours per unit, valued at a specific wage rate is called direct labor efficiency variance. The labor efficiency variance calculates and measures the ability to utilize labor according to expectations. …

## Importance and Limitations of Direct Material Yield Variance

The difference between the expected amount of direct material used and the actual amount of direct material used is known as direct material yield variance. Material yield variance is a management tool to analyze what should be produced from a certain amount of direct material, if the resulted quantity is less than expected, it will …

## Key Importance and Limitations of Direct Material Mix Variance

Direct material is the basic component of any product. The direct material variance arises when the company is manufacturing a product that involves more than one type of material. You can also explain the direct material mix variance as the difference between the costs of the estimated proportion of material with the actual proportion of …

## Importance and Limitations of Direct Material Usage Variance

Direct Material Usage Variance The difference in the value obtained by comparing the actual quantity of direct material used with estimated quantity usage on the standard rate, for a period or specific task is known as a direct material variance. This variance is generally used as a management tool for different purposes. For example, it …

## 3 Importance and 2 Limitation of Direct Material Price Variance

The difference between the actual cost of direct material and the estimated or standard cost of direct material used is termed as direct material price variance. The concept can be clearer with the help of formula: Material Price Variance = (Standard Price-Actual Price) × Actual Quantity The formula has 3 main components, ie •    Standard …

## Importance and Limitations of Sales Mix Variance (With detailed explanation)

The difference between budgeted sales mix and actual sales mix at standard price is called sales mix variance. There is always a difference between the planned sales volume and actual sales volume, so this is a useful tool to identify where the sales are distracted from the plan or not. Sales mix is the ratio …

## 4 Importance of Standard Costing with detailed explanation

Standard costing is a branch of cost accounting or managerial accounting which is mostly used in a manufacturing concern that involves direct material, direct labour, and overheads. Standard rates are used while assigning the cost of direct labour, direct material, and overhead costs, it means that the finished goods and cost of goods sold will …

## What Are the Importance and Limitation of Sales Volume Variances?

Introduction: Sales volume variance is the difference between actual sales volume and budgeted sales volume during a specific time and multiply the resulted quantity with standard price. This variance is calculated when management wants to assess how the actual sales volume affects the expected sales amounts at the standard sales price. The company might have …

## Importance and Limitation of Sales Price Variance

Sales Price Variance Sales price variance emerges when the actual selling price in dollars of a commodity varies from the budgeted or standard unit price in dollars.  In simple words, we can say that the net difference in value by comparing the actual selling price with the budgeted selling price of a commodity. Or we …