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Total Material Variance - Combine Material Price/Usage

Standard costing involves setting standard amounts for materials, labor, and overhead at the beginning of the year as part of the master budget. There are six key variances in standard costing - materials price and usage variances, labor rate and efficiency variances, and controllable overhead variance. Controllable overhead variance is calculated by comparing actual overhead costs to flexible budget overhead, which is the fixed overhead plus overhead applied using a standard overhead rate and actual production levels.

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141 views2 pages

Total Material Variance - Combine Material Price/Usage

Standard costing involves setting standard amounts for materials, labor, and overhead at the beginning of the year as part of the master budget. There are six key variances in standard costing - materials price and usage variances, labor rate and efficiency variances, and controllable overhead variance. Controllable overhead variance is calculated by comparing actual overhead costs to flexible budget overhead, which is the fixed overhead plus overhead applied using a standard overhead rate and actual production levels.

Uploaded by

alik711698
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Standard Costing

Definitions
Standard/Budgeted Amount = Set @ beginning of year (in Master Budget)
Applied/Flexible Overhead = (Std VOH rate) x (Flexible budget hrs, based on actual prodution)

Materials ri!e "arian!e = !"(!# $ S#)
#uantit$ "arian!e = S#(!" % S")

Fixed O/% "olume "arian!e = Budgeted FOH (&aster budget) $ FOH applied (std FOH rate 'std
hours based on atual ati(ity output)
i)e) %* Measures ho+ atual output o&pares +ith +hat +as budgeted

&nfavorable = Dr'
Favorable = (r'

Big Six "arian!es )*op + Bottom = &nfavorable,
,) Materials ri!e "arian!e (based on purhases)
a) (!" purh x !#) o&pared to (!" purh x S#)
-) Materials &sage "arian!e
a) (!" used x S#) o&pared to (S" x S#)
b) !" used . output x /M re0uired per unit
1otal Material Variane %* Co&bine Material #rie23sage
4) -abor .ate )ri!e, "arian!e
a) (!t hours +or5ed x !#) o&pared to (!t hours +or5ed x S#)
6) -abor /ffi!ien!$ )&sage, "arian!e
a) (!t hrs +or5ed x S#) o&pared to (Std hrs sheduled x S#)
b) Std hrs sheduled . (Output x labor hours per unit of output)
1otal 7abor Variane %* Co&bine 8ate29ffiieny Varianes
:) (ontrollable Fa!tor$ O% "arian!e
a) Fatory OH is both (ariable and fixed
b) Fatory OH represents all indiret &anufaturing osts
) Flexible Budget = Fixed ; (VOH rate ' !tual hours)

*0o10a$ Anal$sis of Fa!tor$ O/% /xample
(ontrollable O/% "arian!e (Fixed < Variable)

!tual o(erhead osts (gi(en) . =,>,:??



Standard Hours Flexible Budget for OH . (Fixed ; VOH rate'units produed)
"olume O/% "arian!e (Fixed O2H O@7A is under2o(er applied)

O(erhead !pplied to BC# . (#redeter&ined rate ' Standard hours that are budgeted)

*hree 2a$ Anal$sis of Overhead "arian!e
Spending
9ffiieny
Volu&e

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