Variance Analysis

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. …

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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 …

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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 …

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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 …

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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 …

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