Accounts & Finance
Definition of Direct Material Usage Variance
Direct Labor Efficiency Variance
Direct Labor Efficiency Variance is the measure of the difference between the standard cost of the actual number of direct labor hours utilized during a period and the standard hours of direct labor for the level of output achieved.
Direct Labor Efficiency Variance = Actual hours * Standard Rate - Standard Hours * Standard Rate
Direct Labor Idle Time Variance
Direct labor Idle Time Variance is the cost of the standby time of direct labor which could not be utilized in the production due to reasons including mechanical failure of equipment, industrial disputes and lack of orders.
Idle Time Variance = Number of Idle hours * Standard Labor Rate
Direct Labor Rate Variance
Direct Labor Rate Variance is the measure of a difference between the actual cost of direct labor and the standard cost of direct labor utilized during a period.
Direct Labor Rate Variance = (Actual Quantity * Actual Rate) - (Actual Quantity* Standard Rate)
Direct Material Mix Variance
Direct Material Mix Variance is the measure of the difference between the cost of a standard proportion of materials and the actual proportion of materials consumed in the production process during a period.
Direct Material Mix Variance = (Actual Quantity * Standard Price) – (Standard Mix Quantity * Standard Price)
Direct Material Mix Variance = (Actual Mix Quantity - Standard Mix Quantity) * (Standard Price)
Direct Material Yield Variance
Direct Material Yield Variance is a measure of the cost differential between output that should have been produced for the given level of input and the level of output actually achieved during a period.
Direct Material Yield Variance = (Actual Yield - Standard Yield) * Standard Material Cost Per Unit
Fixed Manufacturing Overhead Volume Variance
Fixed Manufacturing Overhead Volume Variance quantifies the difference between budgeted and absorbed fixed production overheads.
Fixed Overhead Volume Variance = Absorbed Fixed overheads - Budgeted Fixed Overheads
Fixed Overhead Expenditure Variance
Fixed Overhead Expenditure Variance, also known as fixed overhead spending variance, is the difference between budgeted and actual fixed production overheads during a period.
Fixed Overhead Expenditure Variance = Actual Fixed Overheads - Budgeted Fixed Overheads
Fixed Overhead Total Variance
Fixed Overhead Total Variance is the difference between actual and absorbed fixed production overheads during a period.
Fixed Overhead total Variance = Actual Fixed Overheads - Absorbed Fixed Overheads
Sales Mix Volume Variance
Sales Mix Variance measures the change in profit or contribution attributable to the variation in the proportion of the different products from the standard mix.
Sales Price Variance
Sales Price Variance is the measure of change in sales revenue as a result of variance between actual and standard selling price.
Sales Quantity Volume Variance
Sales Quantity Variance measures the change in standard profit or contribution arising from the difference between actual and anticipated number of units sold during a period
Sales Quality Variance = (Budgeted Sales - Unite Sales at Standard Mix) x Standard Profit
Where Absorption costing is used
Sales Volume Variance
Sales Volume Variance is the measure of change in profit or contribution as a result of the difference between actual and budgeted sales quantity.
Variable Overhead Efficiency Variance
Variable Overhead Efficiency Variance is the measure of impact on the standard variable overheads due to the difference between standard number of manufacturing hours and the actual hours worked during the period
Variable Overhead Spending Variance
Variable Overhead Spending Variance is the difference between variable production overhead expense incurred during a period and the standard variable overhead expenditure. The variance is also referred to as variable overhead rate variance and variable overhead expenditure variance.
Variable Overhead Spending Variance = (Actual manufacturing Variable Overheads Expenditure) - (Actual hours x Standard Head overhead rate per hour)
Where, actual hours is the number of machine hours or labor hours during a period.