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

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Definition: Direct labor efficiency variance depicts how efficient the direct labor was in making the actual output that was produced by the direct labor. The direct labor efficiency variance compares the standard hours that 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 …

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Definition: Direct Material Yield Variance is a subdivision of material usage variance. It measures the effect on the cost of any difference between the actual usage of material and that justified by the output produced. In simple words, it measures differences between output produced on a given dimension or level and the level of output …

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Definition: Direct Material Mix variance is a subdivision of material usage variance. If different materials can be substituted the mix variance measures the cost of any variation from the standard mix of materials. This variance separates the aggregate unit cost of each item excluding all the other variables. Formula: Direct Material Mix Variance:                 = …

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Definition: Direct Material Usage Variance measures efficiency in material or material consumption by comparing standard material used for actual production units with actual material usages or consumption. This variance calculation is essential for management to assess if the current production system is running effectively or not. Negative variance generally means production is not run effectively, …

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Definition: Direct Material Price Variance is the difference between the actual price paid for purchased materials and their standard cost at the actual direct material purchased amount. It helps to monitor the costs incurred to produce the goods. It is really important to know how much the price fluctuation had potentially affected the total production …

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Definition: Sales Mix variance measures the change in profit or contribution that is attributable to the changes in the proportion of different products from the standard mix. In simple words, it measures the difference in unit volumes in the actual sales mix from the budgeted sales mix. In reality, there are always some differences between …

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Standard costing: Standard costing is an eminent way of keeping the business costs on track. It is the process of estimating future costs and expenses and comparing them to the actual data in order to analyze how the differences can be manipulated or altered for the betterment of the company. Several budgets are prepared by …

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Definition: Sales volume variance quantifies the increase or decrease in profit due to a difference between the actual number of units sold and the budgeted number of units sold. In cost and management accounting, a variance is a difference between the actual cost/revenue and standard cost/revenue. Formula: The formula for calculating sales volume variance is …

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Definition: Sales price variance measures the increase or decrease in revenue due to a difference in the standard selling price and actual selling price. Standard price is the price at which the business expects to sell its products. In cost management accounting, variance analysis is performed each year with the aim of keeping costs and …

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