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