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.(Formula of Variance )

This is a collection of variance formulas / equations which can help you calculate variances for direct materials, direct labour, and factory overhead.

1. Direct materials variances formulas
2. Direct labor 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)

(
Actual factory overhead) – (Budgeted allowance based on standard hours allowed
*)

(Budgeted allowance based on standard hours allowed*) – (Factory overhead applied or charged to production**)

(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)

(Actual hours worked × Standard overhead rate) – (Standard hours allowed for expected output × Standard overhead rate)

(Actual hours worked × Standard variable overhead rate) – (Standard hours allowed × Standard variable overhead rate)

(Actual hours worked × Fixed overhead rate) – (Standard hours allowed × Fixed overhead rate)

(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