Accounting Chapter 10
Price Variance
actual price and the standard price multiplied by the actual amount of the input. Also known as material price variance
standard hours per unit
amount of direct-labor hours that should be used to produce one unit of finished goods
Quantity Variance
difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input
unfavorable labor
insufficient product demand faulty equipment poorly motivated workers
direct material variance
price and quantity
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.
purchased, used
Direct Labor Variance
rate and hours
price variance=
(AQxAP)-(AQxSP)
quantity variance=
(AQxSP)-(SQxSP)
Labor Rate Variance
AH(AR-SR)
Variable Overhead rate Variance
AH(AR-SR). measures cost differences
material price variance=
AQ(AP-SP)
production manager
responsible for materials quantity variance. Example: labor efficiency variance
standard quantity per unit
Direct materials requirements per unit of finished product, including allowance for waste and spoilage
standard cost card
shows the standard quantity (or hours) and standard price (or rate) of the inputs required to produce a unit of a specific product
purchasing manager
Responsible for materials price variance
Material Quantity Variance=
SP(AQ - SQ)
labor efficiency variance
SR(AH-SH)
Variable Overhead Efficiency Variance
SR(AH-SH). measures activity differences
Spending Variance
The difference between actual results and the flexible budget amount
U
When actual quantity is greater than standard quantity, the variance is unfavorable.
Standard
a benchmark for measuring performance. It is widely used in managerial Accounting. set for each major production input or task. compared to the actual quantities and costs of inputs