Standard Costing and Variance Analysis Formulas:
Learning Objective of
the article:
 Learn the formulas
to calculate direct materials, direct labor and factory overhead
variances.
This is a collection of variance formulas /
equations which can help you calculate variances for direct materials,
direct labor, and factory overhead.
 Direct materials variances formulas
 Direct labor variances formulas
 Factory overhead variances formulas
Direct Materials Variances:
Materials purchase price variance Formula:
Materials purchase price variance = (Actual
quantity purchased ×
Actual price) – (Actual quantity purchased ×
Standard price)
Materials price usage variance formula
Materials price usage variance = (Actual
quantity used × Actual
price) – (Actual quantity used ×
Standard price)
materials quantity / usage variance formula
Materials price usage variance = (Actual
quantity used ×
Standard price) – (Standard quantity allowed ×
Standard price)
Materials mix variance formula
(Actual quantities at
individual standard materials costs) – (Actual quantities at weighted
average of standard materials costs)
Materials yield variance formula
(Actual quantities at weighted average of
standard materials costs) – (Actual output quantity at standard materials
cost)
Direct Labor Variances:
Direct labor rate / price variance formula:
(Actual hours worked × Actual rate) – (Actual hours worked × Standard rate)
Direct labor efficiency / usage / quantity
formula:
(Actual hours worked × Standard rate) –
(Standard hours allowed × Standard rate)
Direct labor yield variance formula:
(Standard hours allowed for expected
output × Standard labor rate) – (Standard hours allowed for actual output ×
Standard labor rate)
Factory Overhead Variances:
Factory overhead controllable variance
formula:
(Actual factory overhead) – (Budgeted allowance based on standard hours
allowed*)
Factory overhead volume variance:
(Budgeted allowance based on standard
hours allowed*)
– (Factory overhead applied or charged to production**)
Factory overhead spending variance:
(Actual factory overhead) –
(Budgeted allowance based on actual hours worked***)
Factory overhead idle capacity variance
formula:
(Budgeted allowance based on actual hours
worked***)
– (Actual hours worked ×
Standard overhead rate)
Factory overhead efficiency variance formula:
(Actual hours worked ×
Standard overhead rate) – (Standard hours allowed for expected output × Standard overhead rate)
Variable overhead efficiency variance formula:
(Actual hours worked ×
Standard variable overhead rate) – (Standard hours allowed × Standard variable overhead
rate)
Variable overhead efficiency variance formula:
(Actual hours worked ×
Fixed overhead rate) – (Standard hours allowed ×
Fixed overhead rate)
Factory overhead yield variance formula:
(Standard hours allowed for expected output ×
Standard overhead rate) – (Standard hours allowed for actual output × Standard overhead rate)
*Fixed
overhead budgeted + Standard hours allowed × Standard variable overhead
rate
**Standard
hours allowed for actual production × Standard overhead rate
***Fixed
overhead budgeted + Actual hours worked × Standard variable overhead rate
