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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Importance and Limitation of Sales Quantity Variance

Introduction: Sales Quantity variance is the difference between actual quantity and budgeted quantity of unit sold during a specific time and multiply the resulted quantity with 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

Definition: Fixed overhead volume variance: It is defined as the difference between fixed overheads actually incurred and fixed overheads applied to units actually produced. Fixed overhead capacity variance: It is the difference between budgeted fixed overheads and fixed overheads applied to the number of hours worked. Fixed overhead efficiency variance: It is the difference between …

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Fixed Overhead Spending Variance: Definition, Formula, Explanation, And Analysis

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

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

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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Variable Overhead Efficiency Variance: Definition, Formula, Explanation, And Analysis

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

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