What Are the Importance and Limitation of Sales Volume Variances?

Variance Analysis

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 …

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What is the Importance and Limitation of Sales Quantity Variance?

Sales Quantity Variance, Variance Analysis

Sales quantity variance is the difference between actual quantity and budgeted quantity of units sold during a specific time and multiplying the resulting quantity with the standard price. The formula for calculating sales quantity variance is simple and easy to understand, Sales quantity variance= (Expected Quantity – Actual Quantity) × Standard Rate Example to Understand …

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Fixed Overhead Volume, Capacity, and Efficiency Variance

Variance Analysis

Definition: Formula: Explanation: Fixed overhead total variance can be divided into two separate variances i.e. fixed overhead spending variance and fixed overhead volume variance. Fixed overhead volume variance is further divided into two more components; fixed overhead capacity variance and fixed overhead efficiency variance. Fixed overhead variances measure the over-or under-absorption of fixed overheads. It …

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What is Fixed Overhead Spending Variance? Definition, Formula, Explanation, And Analysis

Variance Analysis

Definition: Fixed overhead spending variance, also known as fixed overhead expenditure variance, measures the difference between actual fixed costs incurred and the budgeted fixed costs. It is one of the two parts of fixed overhead total variance; the other is fixed overhead volume variance. Formula: Budgeted fixed overheads – Actual fixed overheads = Fixed overhead …

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Fixed Overhead Total Variance: Definition, Formula, Explanation, And Illustration

Variance Analysis

Definition: A fixed overhead total variance is the difference between the actual fixed overheads that were incurred and the fixed overheads that were absorbed during the year. Fixed overhead total variance is constituted of fixed overhead expenditure variance and fixed overhead volume variance. Absorbing or flexing fixed overheads means the allocation of fixed production overheads …

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What is Variable Overhead Efficiency Variance? Definition, Formula, Explanation, And Analysis

Variance Analysis

Definition: A variable overhead efficiency variance is one of the two contents of a total variable overhead variance. It is the difference between the actual hours worked and the standard hours required for budgeted production at the standard rate. Variable overhead is an indirect production expense that varies based on production. It includes salaries and …

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What is Variable Overhead Spending Variance? Definition, Formula, Explanation, And Analysis

Variance Analysis

Definition: Variable overhead spending variance is the difference between the actual and budgeted rate of spending on variable overheads. Overheads are production expenditures that are indirect i.e. can’t be traced back to one unit of production like direct material or direct labor. Variable overhead is an indirect expense that increases as production increases and decreases …

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Direct Labor Rate Variance: Definition, Formula, Explanation, Analysis, And Example

Variance Analysis

Definition: Direct Labor rate variance indicates the actual cost of any change from the standard labor rate of remuneration. Simply put, it measures the difference between the actual and expected cost of labor. Direct labor rate variance is also called direct labor price or spending or wage rate variance. In calculation, it is very similar …

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What is Direct Labor Efficiency Variance? Definition, Formula, Explanation, Analysis, And Example

Variance Analysis

Definition: Direct labor efficiency variance depicts how efficient the direct labor was in making the actual output produced by the direct labor. The direct labor efficiency variance compares the standard hours it should have taken to make the actual output Vs. the actual hours it took and multiplies the difference in hours by the standard cost per direct labor …

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