Chapter 10 & 11: Variance Analysis

1)Variance Analysis for Direct Materials:

Actual Cost

Actual Quantity (10)

X

Actual Price/unit ($2)

AQpurchased (10)

X

SPpurchased

($1.5)

AQused

X

SPused

Standard Cost

(Expectations)

Standard Quantity (12)

X

Standard Price/unit ($1.5)

Direct Materials Price Variance

= Difference

$5 (Unfavorable)

Direct Materials Usage Variance

= Difference

$3 (Favorable)

Total Direct Materials Variance = Difference

$2 (Unfavorable)

Increasing Unfavorable Increasing

Favorable

Direct Materials Framework:

Standard Quantity = Actual Output * Input-Output Ratio

2)Variance Analysis for Direct Labor:

Actual Cost

Actual Hours

X

Actual Rate/hour

AH

X

SR

Standard Cost

(Expectations)

Standard Hours

X

Standard Rate/hour

Direct Labor Rate Variance = Difference

(AH) (SR – AR)Direct Materials Efficiency Variance =

Dfference

(SR) (SH – AH)

Total Direct Labor Variance = Difference

Increasing Unfavorable Increasing

Favorable

Exercise 10-33

DM = 5lbs, DL = 2hrs = input-output ratio (5lbs:2hrs)

DM Variance:Actual Cost

Actual Quantity

(930,000)

X

AQpurchased

(930,000)

X

SPpurchased ($4)

AQused

(925,000)

X

SPused ($4)

Standard Cost

(Expectations)

Standard Quantity (175,000

* 5)

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