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Standard Costing and Variance Analysis Formulas:

Learning Objective of the article:

  1. 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.

  1. Direct materials variances formulas
  2. Direct labor variances formulas
  3. 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

 

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You may also be interested in other articles from "standard costing and variance analysis" chapter

  1. Standard Costs and Management By Exception
  2. Setting Standard Costs - Ideal Versus Practical Standards
  3. Direct Materials Price and Quantity Standards
  4. Direct Materials Price Variance
  5. Direct Materials Quantity Variance
  6. Direct Labor Rate and Efficiency Standards
  7. Direct Labor Rate/Price Variance
  8. Direct Labor Efficiency | Usage | Quantity Variance
  9. Manufacturing Overhead Standards
  10. Overall or net factory overhead variance.
  11. Controllable variance
  12. Volume variance
  13. Spending variance
  14. Idle capacity variance
  15. Efficiency variance
  16. Spending variance
  17. Variable efficiency variance
  18. Fixed efficiency variance
  19. Idle capacity variance
  20. Mix and Yield Variance - Definition and Explanation
  21. Materials Mix and Yield Variance
  22. Labor Yield Variance
  23. Factory Overhead Yield variance
  24. Variance Analysis and Management By Exception
  25. Managerial importance and usefulness of variance analysis
  26. Advantages and Disadvantages of Standard Costing System
  27. Standard Costing Discussion Questions and Answers
  28. Standard Costing and Variance Analysis Formulas
  29. Standard Costing and Variance Analysis Problems and Solution
  30. Standard Costing and Variance Analysis Case Study

 

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