Cost and Management accounting concept Standard costing MBA material

Variance analysis is the process of analyzing variances by sub-dividing the total variance in such a way that management. Can assign responsibility for any off standard performance.

Variance analysis is the process of computing the amount of variance & isolating the causes of various between actual and standard. An important aspect of variance analysis is the need to separate controllable from an controllable variances.

Favorable &un favorable variances

              Where the actual cost is less than for standard cost is known as favorable (or)credit variances. And the other hands where the actual cost is more than for standard cost is known as unfavorable(or)debit variances.

Cost variance

Cost variance is the diff between standard cost and actual cost incurred during a period . Total cost is divided 3-types

These are:

Material cost variance

Labor cost variance

Over head variance

1.Material cost variance:

          Material cost variance as in divided in to 2 types.

These are:

●      Material price variance

●      Material usage variance

Material usage variance:

Material usage variance is also dividing in to 2 types.

These are:

●      .material mix variance

●      .material yield variance

2. labor cost variance:

                                        Labor cost variance is dividing into 2 types.

           

These are:

                                cost variance Labor

              Labor rate                        labor efficiency     

               variance                                 variance

                                         

                                    labor mix      labor yield    idle time

                                       variance           variance      variance

                             LABOR COST VARIANCE

MATERIAL COST VARIANCE:

               

                              MCV=(SQ-SP)-(AQ*AP)

                             

                               SQ=standard quantity

                                Sp=standara price

                               AQ=ACTUAL QUANTITY

                               AP=ACTUAL PRICE

MATERIAL PRICE VARIANCE:                     

                                    MPV   = (SP-SQ)*AQ

MATERIAL USAGE VARIANCE:

  

                                 MUV=(SQ-AP)*SP

MATERIAL MIX VARIANCE:

                                MMV=(RSQ-AQ)*SP

                           

                       RSQ=REVISED STANDARD QUANTITY

                      STANDARDITY OF ONE MATERIAL   *TOTAL OF              RSQ=  TOTAL OF STANDARD QUANTITY OF ALL    A/Q OF                                                                                                                                                      

         MATERIAL                                                     MATERIAL

Material yield variance:

                                      

=(actual yield –standard yield)*standard output

LABOR COST VARIANCE:

                                   LCV=(S.H*S.R)-(A.H*A.R)

ABOUR RATE VARIANCE: 

 

                                                  LPV=(SR-AR)*AH

LABOR EFFICIENCY VARIANCE:

                                         LEV=(S.H-A.H)*SR

LABOR MIX VARIANCE:

                       LMV=(RSH-AH)*SR

RSH=Revised standard hours

             

            RSH=Standard hours*total actual hours

                      Total standard hours

Labor yield variance:

Lyv=(a.y-s.y from actual output)*S.L cost per unit

IDLE TIME VARIANCE

                   IDLE TIME VARIANCE=IDLE HOURS-STANDARD

                                                                                     RATE