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AAT FNPF
Standard costing variance formulae
| Question | Answer |
|---|---|
| Variance name: Standard material direct cost | Formula: Standard quantity of material x standard material price |
| Variance name: Standard direct labour cost | Formula: Standard quantity of hours x Standard labour rate |
| Variance name: Materials Price Variance The impact on profit of paying a different price per kg from budgeted. | Formula:(Actual Price – Standard Price) x Actual Quantity used If material actually cost more than the expected (standard) cost, then we have an adverse variance. If they cost less, we have a favourable variance. |
| Variance name: Materials Usage Variance The impact on profit of using a different quantity of material per unit from that budgeted. | Formula:(Actual Quantity - Standard Quantity for actual production) x Standard Price If actual usage is less than standard, we have a favourable variance. |
| Variance name: Labour Rate Variance The impact on budgeted profit of paying a different wage rate per hour to that budgeted. | Formula:(Actual Wage Rate - Standard Wage Rate) x Actual Hours If actual labour costs are lower than standard cost, we have a favourable variance. If they exceed standard cost, we have an adverse variance. |
| Variance name: Labour Efficiency Variance The impact on profit of working a different number of hours per unit to that budgeted. | Formula: (Actual Hours - Standard Hours for actual production) x Standard Wage Rate If actual hours are less than standard hours, we will see a favourable variance. |
| Variance name: Idle time variance Idle time variance is the impact on profit of paying labour when no work takes place | Formula: Hours worked - Hours paid x Standard Rate Idle time variance is always adverse! |
| Variance name: Fixed Overhead Expenditure Variance The extent to which fixed overheads have actually been over/under spent compared with budget. | Formula: Actual Overheads - Budgeted Overheads |
| Variance name: Fixed Overhead Volume Variance (Did we produce as much as we should have?) The extent to which fixed overheads have been over/under absorbed as a result of a change in production volume. | Formula: (Actual production less Budgeted production) x Standard fixed overhead rate If what did happen exceeds what should have happened, we have an adverse variance, otherwise a favourable variance will be recorded. |
| Variance name: Fixed Overhead Capacity Variance (Did our actual hours worked exceed the budgeted hours?) Extent to which over/under absorption was due to working more/less hours than the budgeted hours (i.e. the available capacity) | Formula: (Actual hours of input less Budgeted hours of input) x Standard fixed overhead rate If the cost of the actual hours worked is less than the budgeted hours worked, we have a favourable variance; otherwise an adverse variance will be returned. |
| Variance name: Fixed Overhead Efficiency Variance The extent to which the over/under absorption was attributed to working more/less hours than expected to make the actual output. (How hard were we working?) | Formula: (Actual Hours - Standard Hours for Actual Production) x Standard fixed overhead rate If actual hours worked exceed standard hours for actual production, we have an adverse variance. |
| Variance name: Total Material Cost Variance What the unit could have cost in material for all units actually made versus what the material did cost for all units made i.e. Flexed budget for material vs. actual cost of material | Formula: (Standard Quantity x Standard Price for Actual Output) – (Actual Quantity x Actual Price for Actual Output) |
| Variance name: Total Labour Cost Variance What the unit could have cost in labour for all units actually made versus what the labour did cost for all units made i.e. Flexed budget for labour vs. actual cost of labour | Formula: (Standard Hours x Standard Rate for Actual Output) – (Actual Hours * Actual Rate for Actual Output) |
Created by:
m.webster
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