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Total Direct Material Variance

This document discusses various types of cost variances that can occur in management accounting, including direct material variances, fixed and variable cost variances, labor variances, and gross profit analysis variances. It provides formulas to calculate variances such as price, quantity, mix, volume, efficiency, and spending variances. Examples of variances include total direct material cost variance, fixed cost expenditure variance, variable efficiency variance, and net volume variance.

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Qaiser Khan
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© Attribution Non-Commercial (BY-NC)
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Download as XLS, PDF, TXT or read online on Scribd
47 views

Total Direct Material Variance

This document discusses various types of cost variances that can occur in management accounting, including direct material variances, fixed and variable cost variances, labor variances, and gross profit analysis variances. It provides formulas to calculate variances such as price, quantity, mix, volume, efficiency, and spending variances. Examples of variances include total direct material cost variance, fixed cost expenditure variance, variable efficiency variance, and net volume variance.

Uploaded by

Qaiser Khan
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Direct Material Variance

Total Direct Material Variance AC - (SQA x SR) or AC - (AY WASR) Price Variance AQAM (AR - SR) Usage / Quantity / Production SR ( AQAM - SQA) Mix Variance
AQAM < AQSM = (F) AQSM < SQA = (F)

Yield Variance SR (AQSM - SQA) or SR (AY - SY)

SR (AQAM - AQSM)

Shortcut for the Material Variance (A) AC ---> AQAM AR xxxxxx


Price Variance

(B) Budget at Actual AQAM SR

xxxxxx
Total DM Variance (A>B)=Adverse
Mix (B>C)=Ad Yield (C>D)=Ad Quantity Variance (B>D)=Adver

(C) AQSM SR

xxxxxx

(D) SC ---> SQASM SR

xxxxxx

If SR of input is given, it is easy to calculate SRInput(AQSM-SQA) If SC of output is given, Sy = (Actual Input Std output per kg of R/M) SCOutput(Ay - Sy)

Should be same.

SQA = Ay Standard Consumption of material per unit Sy = Actual Input Standard output per kg of R/M Idle Capacity Ratio = Practical capacity - Budgeted Capacity Practical capacity Production Volume Ratio = Standard Hours produced Budgeted capacity

100

Ay and Sy Actual Input xxx less: % N.loss (xxx) Sy xxx less: A.loss (xxx) Ay xxx

100 = X %

where actual output is 'X%' of budget Efficiency Ratio = Standard hours Actual hours

100

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Fixed & Variable Cost Variance


Total Fixed Cost Variance AC - (SHA SRFC) Total Variable Cost Variance AVC - (SHA SRVC)

FC Expenditure Variance AFC - Budgeted FC

Volume Variance SRFC (BH - SHA) or SRFC/BQ (BQ - AY)

Capacity Variance

Fixed Efficiency Variance

Variable Efficiency Variance

Variable Expenditure (Spending) Variance

SRFC (BH - AH)

SRFC (AH - SHA)

SRVC (AH - SHA)

AH (ARVC - SRVC)

Efficiency Variance SR ( AH - SHA)

Matz n Usrey Terms 2 Variance Controllable Variance Volume Variance 2,3 Variance Spending Variance Capacity Variance Efficiency variance 2,3,4 Variance Spending Variance Capacity Variance Fixed Efficiency Variance Variable Efficiency Variance

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Labor Variance
(When only labor is given)

Total Direct Labor Cost Variance

AC - SC
Rate Variance Traditional Efficiency Variance

AH (AR - SR)
Labor Mix Variance

SR ( AHAM - SHA)
Labor Yield Variance

SR (AHAM - AHSM)

SR ( AHSM - SHA)

Labor Variance
(When only labor is given)

Total Direct Labor Cost Variance

AC - SC
Rate Variance Traditional Efficiency Variance

AH (AR - SR)
Idle Time

SR ( AHPaid - SHA)
Real Efficiency

SR (AHIdle - AHWorked)

SR ( AHWorked - SHA)

Labor Variance
(When labor and raw material, both are given)

Total Direct Labor Cost Variance

AC - SC
Rate Variance Traditional Efficiency Variance

AH (AR - SR)
Yield

SR ( AH - SHA)
Real Efficiency

SR (SHASy - SHAAy)

SR ( AH - SHASy)

Calander Variance Standard rate of FC/day or Budgeted FOH/Budgeted No. of days

(Actual Days - Budgeted Days)

ARVC = VOH/AD SRVC = VOH/BD ARFC = FOH/AD SRFC = FOH/BD AHAM < SHA = (F) SHA = Ay Standard time per unit Standard Time pu = DLH / BQ

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Gross Profit Analysis GP difference

Sales (difference)

Cost (Difference)

Sales Price AQFG (AR - SR)

Sales Volume SR (AQ - BQ)

Cost Volume SR (AQ - BQ)

Cost Price AQ (AR - SR)

Net Volume / Sales Volume Variance SRGP (AQ - BQ)

Net Volume / Sales Volume Variance (In case of >1 products)

Mix Variance SRGP (AQAM - AQSM)

Final Sales Volume Variance SRGP (AQSM - BQ)

Reconciliation of Standard And Actual Costs Actual Cost Add: All favourable variances Less: All unfavourable variances Standard Cost
xxx

xxx

(xxx) xxx

Volume Ratio =

SHA BH SHA AH AH BH

Efficiency Ratio = Capacity Ratio =

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