Standard Cost Variance Analysis (Procedure With Detailed Formulas For DM, DL & Var. & Fixed OVHD)

a budget that is based on the actual activity of a period is known as a: This is a topic that many people are looking for. star-trek-voyager.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, star-trek-voyager.net would like to introduce to you Standard Cost Variance Analysis (Procedure With Detailed Formulas For DM, DL & Var. & Fixed OVHD). Following along are instructions in the video below:

“We re going to be going over here is variance analysis here for a direct direct materials. Direct labor and overhead. And we re going to look at it in of standard costing okay. So when we re doing variance analysis.

Really what we have is three different amounts or our budgets. That we really have to be looked at yet so we ll be looking at in this case based on our standard costing. We re going to have some standard amount here that we establish for our labor materials and our overhead and then based on some results during a period or our actual results that we have we re going to have to have to determine some actual amount here and then knowing our actual amount in our standard amount. We re going to be able to determine the flexible amount here for our variance analysis.

Okay so the first thing here when we re talking about variance analysis. This is where we re looking in comparing our actual results versus in this case. The standard cost and our actual results are really are going to be our actual cost and then our standard cost that s going to be a predetermined cost here for our labor or material and our overhead. Okay so when we talk about our standard amount.

What would that be that would be the standard quantity that we allow for our labor material and overhead time some standard unit price so standard quantity times. Some standard price equals our standard cost okay and you would do that here when you develop your product or at the beginning of a period. You d have to develop or determine your standard costing. So then when you actually look at your actual results say at the end of the period or during the period.

You can compare your actual results to your standard amounts here. But your actual results would be the actual quantity that we use for our labor and material and overhead on a unit basis here times. Some actual price so actual quantity times. Some actual price equals our actual results okay so now we know our standard amount that we established here or the predetermined amount that we established and we know our actual amount that we have here say that we our actual results that we have here for the period for our cost now we can set up what they call the flexible amount or the flexible budget and that s simply taking the actual quantity that we ve used here for our labor material and overhead from our actual results and we take that actual quantity times.

The standard price that we established here based on our standard costing here so actual quantity taken from our actual. Reason. The results here times. The standard price from our standard cost that amount our actual quantity times.

The standard price here that s our flexible budgeted amount. And that s where we come in with our analysis analysis here this is where we re going to be looking for labor material and overhead. We re going to be comparing the actual results. We have for the period with our flexible amount here and comparing our flexible amount with the standard that was established here and also you look at the overall variance.

The actual versus your standard amount okay so let s start with our direct materials here so with our direct materials. You re going to have a price variance. A usage..

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Variance and a quantity variance. So let s look at this price. Variance and see where we got that from and that s really taking. It s really the difference between the actual price here in the standard price that we paid now i got everything color coded here.

So it s easy to follow a thrill so just looking again back at our price variance difference between our actual price and our standard price times. Some actual quantity that we purchased and really that s where we re looking at our actual versus our flexible amount so you can see with our actual amount here. Let s see where we got that price variance from the actual amount was our actual quantity. Purchased times the actual price flexible amount was the actual quantity here that we purchase actual price actual quantity purchased excuse me from our actual results for the period times.

The standard price that we established here from our standard. Okay so you see how this table works. Okay. So you can see here for that price variance.

The common factor here between your actual and flexible amount was the actual quantity purchase here okay so we can factor that out move it down over here. And that s where we get our price variances difference between your actual price versus our standard price. We factor it out the actual quantity that we purchased okay. So that s for our price variance and that s how this table works here.

It s all color coded. You can see how it how you can factor out your different variables. Okay. So now for the usage.

Variable a usage. Amount or you seeds. Variance excuse. Me.

That s going to be your actual quantity that you used for the period. And that amount times the difference between your actual price versus your standard price again you re looking comparing your actual results with the flexible amount. And you can see where our common factor. Here for this usage.

Variance or the amount that we used here was the actual quantity used we can factor that out here from our are between our actual under flexible amounts. So the difference was variance is really the actual price here versus. The standard price you can see how we factor that on okay..

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So actual the difference between the actual price a difference between the actual price and the standard price that difference times. The actual quantity used was the usage variance again you can see usage is based on the quantity use here price was based on the actual quantity purchased difference between actual and the standard amount okay and then we got that quantity variance here and that s really going to be the difference between our flexible amount and our standard amount that we established here. So you can see for a flexible amount. It s going to be a quantity so it s going to be based on the quantity used here times some standard price flexible mount takes the quantities actual quantity from the for your actual results and it times at times the standard price from the standard amount and then for a standard amount.

This is going to be the standard quantity allowed here for in this case for a direct material for our product. Here. So. That you have a certain standard a quantity allowed times the standard price okay so you can see how we can factor that out here that common factor between a flexible and a standard amount is the standard price here so.

The variance is going to be between actual quantity used here versus the standard quantity allowed and you can see that down here actual quantity used difference between the actual quantity using the standard quantity allowed that difference times the standard price is our quantity. Variance okay so we ll go on here at our direct labor. Variance and works in the same similar fashion here again. We re going to have a rate or price variance and that s simply taking looking at your actual versus your flexible amount so let s see what the common factor is here so the actual and the flexible share the actual hours used here and as a factor and the difference would be the actual rate here for direct labor versus.

The standard rate here allowed so we just factor out our actual hours used here and then the pareto our price variance with difference between the actual rate and our standard rate here. So that difference. Times. The actual hour is used here between our actual and flexible amount is our rate or price.

Variance and then for our efficiency variance that s going to be based on actual hours well the flexible. We re going to have our flexible versus our standard amount here so the common factor between a flexible and standard amount here is those our standard rate. So we can factor out our standard rate move down here for efficiency. Variance and the difference is going to be the difference between the extra hours use and their standard hours allowed here for direct labor for that product.

So difference actual hours used and compare that to the standard hours allowed times your standard rate here so that s your efficiency. Variance and then for variable overhead. You re going to have a spending variance and again an efficiency variance so the spending variance that s going to be between the actual inflexible amount. So you can see the common factor here between actual and flexible is again the actual hours you i m showing that in green.

Here. Everything is color coded here. So you factor that out so. What do you end up hit with here to put the spending variance.

It s the difference between the actual variable rate with druckman you re going to have some variable rate here for the variable overhead so you get your difference between actual variable rate in the standard variable rate allowed here or a standard variable rate that difference times the actual our zeros common factor here between actual and flexible is extra or joules okay so that s your spending variance. Now you re going to have an efficiency variance and that s between your flexible and your standard amount okay so what is the common factor between them it s the standard variable rate here okay so you can factor that out and then the difference would be between the actual hours used versus your standard hours allowed showing down here actual hours used compare that to the standard hours allowed that different times. The standard variable rate..

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So that would be your efficiency variance and then we come down to just the fixed overhead variance that s a bit different here. Again. We re going to have a spending variance in a volume variance so looking at our spending variance is just difference between the actual vs are flexible amount and this is a little different here we don t have any common term that we can factor out between the two here so we re just going to have to look at the difference. So the actual amount would be the actual hours used times.

Some actual fixed overhead rate here. There s going to be some fixed overhead rate. Just like we had a variable overhead rate. We re going to have a fixed overhead rate.

Some actual amount okay so that amount and then it would be the difference with the flexible log here. We re going to have what they call denominator hours. Here and those are really we re basing everything on direct labor hours here for our fixed and variable overhead. So the denominator hours is really the total labor hours here if we have for the period.

So our flexible amount would be the total denominator hours times. Some standard fixed rate. Okay. So that s our flexible amount standard fixed rate times.

Those total direct labor hours here our denominator hours and compare that to our actual amount actual hours use times actual fixed rate. So that difference here is our spending variance and then we get down to the volume variance and that s simply the difference here between our flexible and our standard amount. So do we have a common factor. Here yes.

We do standard fixed overhead rate. There s some fixed overhead standard. Fixed overhead rate. We share between our flexible and standard amount.

And then the differences between those total denominator direct labor hours that were basing our rates on here versus the standard hours allowed here so that difference denominator hours total direct labor hours here compare that to the standard hours. Allowed that difference. Times. The standard fixed overhead rate.

That s your volume variance okay. So we ve gone through all our variances. Let s just finish up by looking at our key here..

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So you can understand it so i ve gone to color coded. Key here so the act. A qp here in green was the actual quantity purchased squ here in a standard quantity art. S.

Qa here was the standard quantity. Allowed here based on our standard cost. Ap. Here.

Was the actual purchase price sp. Here in red was would be our standard purchase price. These are all on a unit basis. Here to understand that a hu here was the actual hours used here and those would then a direct labor hours.

Really based on or whatever hour. Whatever your basis was and in this case. We were looking at direct labor hours. Sha.

Would be the standard hours allowed in blue here. Av would be the actual very abuna variable cost here in a per unit basis. Sv is the standard unit variable cost shown in red af. Here would be an actual fixed overhead rate again on a per unit.

Basis. Sf would be a standard fixed overhead rate here and then d h. Would be some total total direct labor hours okay so that we ve just gone through the formulas. Here and the what you would do here to determine your variance analysis on direct labor direct material and overhead both variable and fixed and based on standard.

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