Variance Analysis

Question 1

Favourable=

Adverse =

Answer 1

• A>B and difference leads to an increase

- B>A and difference leads to a decrease

Question 2

Material

Answer 2

AQ x AP = \
Price variance (diff in price)
/
AQ x SP = (SP= budgeted/AFOH)
\
Usage variance (diff in quantity)
SQAP x SP = /

• SQ= how much material should be used for one finished product
• AP = actual number of units produced
• TOTAL PRICE
• TOTAL USAGE

Question 3

How to work out SP/SR/SFOAR and SQAP/SHAP if question in table form?

Answer 3

SP/SR/SFOAR= £/ activity for certain one

SQAP/SHAP= (budgeted activity/ budgeted production units) x actual production units

Question 4

Labour

Answer 4

AH x AR= \
Rate variance (diff in hourly rate)
/
AH x SR=
\
Efficiency variance (diff in no of hours worked)
SHAP x SR= /

• SH= time that should of been taken to make one finished unit (hours)
• AP= the actual number of finished units produced
• TOTAL RATE
• TOTAL EFFICIENCY

Question 5

Fixed overheads

Answer 5

AH x AFOAR= \
                          FOH Expenditure 
                        /
BH x SFOAR= 
                        \ 
                         FOH Capacity
                        /
AH x SFOAR= 
                           \ 
                             FOH Efficiency 
SHAP x SFOAR= /

• FOH Volume variance = FOH Capacity + FOH Efficiency
• FOH Volume variance = (Actual Variance - Budgeted Variance) x SFOAR

Question 6

Yield Variance

Answer 6

(Units should be produced by AQ in SM - AQ units produced) x SC per unit

-SC per unit= cost to produce all material/amount of material

Question 7

Mix variance

Answer 7

Material A/B/C
AQ in Actual mix x SP= \
                                                VARIANCE
AQ in Standard mix x SP=/
(actual input x material for a/b/c)

-TOTAL MIX VARIANCE

Question 8

Material usage variance =

Answer 8

Material mix variance + Material yield variance

Question 9

Sales variances

Answer 9

• Sales volume variance

(Actual sales price - Budgeted sales price) x Standard Contribution

Standard contribution= selling price - variable costs

• Sales price variance

(Actual sales price - Budgeted sales price) x Actual sales volume

Question 10

Reconciliation of cost of production to actual cost of production

Answer 10

Standard cost of production
-standard cost of one unit x actual units = Budgeted cost of production

                                                 FAVOURABLE         ADVERSE 
MATERIAL PRICE
MATERIAL USAGE
LABOUR RATE
LABOUR EFFICIENCY 
FOH EXPENDITURE
FOH CAPACITY
FOH EFFICIENCY 

TOTAL VARIANCES                   (-)                              (+)       = 
Actual cost of production = budgeted cost of production + total variances 

• > state whether adverse or favourable with figures
• > look out for NL of material