Standard Costing is a crucial topic in cost accounting and is used by almost every company as a yardstick to compare its performance by matching actual versus budgeted. Standard Costing Problems and Solutions In the exam, Standard Variance analysis questions…
1. Material quantity variance is calculated in: Process costing Standard costing Batch costing 2. The purpose of material quantity variance is to identify differences between material actual and standard quantity used in the production True False 3. Material quantity variance…
1. Material price variance is calculated in: Process costing Standard costing Batch costing 2. The purpose of material price variance is to identify differences between material actual and standard cost True False 3. Material price variance is favorable when: Material…
It is the difference between actual overhead incurred and the standard overheads. Formula Overhead variance = Actual overheads incurred – Standard overheads Example Following data is available for Alpha industry: Standard cost Overhead $83,900/- Actual Cost Overhead $70,500/- Required: Calculate Overhead…
In orde to understand the effect of variation in number of hours planned and number of hours actually used to produce the products, the efficiency or hour variance is used. Formula Efficiency variance = (Actual hours – Standard hours) x…
Rate Variance is used to identify the difference in labour cost due to change in the rate of pay to labours. Formula Rate variance = Difference in rates x Actual hours worked Example Following data is available for Alpha industry: Standard…
Direct labour cost may be the reason of gain or loss, so the use of Labour variance is very helpful in improving the performance of the operations. There may be circumstances where the production manager hired labour at an increased…
Material Quantity Variance arises due to the differences in the actual quantity used and the standard quantity set for the planning purposes. It is obtained by multiplying the standard price of the material with the difference between the actual quantity…
It is also called raw material price variance. It is a part of the total material variance. It indicates the difference between the actual amount incurred on raw materials purchased and the standard amount estimated for the purchase of the materials. …
The difference between standard material cost and actual material cost on the basis of actual production is termed as Total Material Variance. Formula Material variance = Standard cost – actual cost Example Question The standard cost and actual cost of…