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Chapter 8 Basic Variance

The document outlines a detailed analysis of variances in material usage, labor costs, variable overheads, and sales performance. It highlights discrepancies between standard and actual costs, leading to both favorable and adverse variances in profit. The final profit is reported as 1,725.50 after accounting for fixed costs and contributions.

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Justin MUNYAMAHORO
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16 views5 pages

Chapter 8 Basic Variance

The document outlines a detailed analysis of variances in material usage, labor costs, variable overheads, and sales performance. It highlights discrepancies between standard and actual costs, leading to both favorable and adverse variances in profit. The final profit is reported as 1,725.50 after accounting for fixed costs and contributions.

Uploaded by

Justin MUNYAMAHORO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Material

Usage meal/units Material per unit std cost std cost $ Variance
Should use (std use) 630 0.4 252 Kg
did use (actual) 240 Kg
Difference or variance 12 Kg 1.5 18
value at standard cost per kg
(SQ - AQ) x SP (252Kg - 240) x $1.5/kg

Price Kg std cost $ total cost $


should cost (standard cost) 260 1.5 390
Did cost (actual) 260 380
Difference (variance) 10 10
(SP - AP) x AQ (1.5 - 1.46) x 260kg

Labour

Rate Hour std rate $/hr. total cost


Actual hours should cost 300 4 1,200
did cost 300 1,350
difference - 150
(SR - AR) x Ahrs (4 - 4.5) x 300 hrs.

Efficiency units time per unit total hours std rate per hour
should take 630 0.5 315
did take 290
difference or variance at std rate 25 4 100
(SH - AH) x SR (315 - 290) x $4

Idle time
Hours worked 290
Hours paid for 300 std rate
Difference (idle time at standard rate) -10 4 -40

Variable overhead

Expenditure hours work std rate $ total variable


Should cost 290 1 290
did cost ( actual expenditure) 325
Difference -35

Efficiency units time per unit total hours std rate


Should take 630 0.5 315
did date 290
difference measured at standard rate of $1 25 1 25
Sales variance

Price variance units Std selling price total$


Should sell for (std price) 630 6.95 4,379
Did sell for 630 4,500
difference (SP - AP) x AQ (6.95 - 7.14) x 630units 121.50

Volume variance units at standard contribution


Budgeted volume 600
Actual sales volume 630
Difference (valued at contribu 30 3.85 116
Actual profits
Sales 4,500
material 350.77
labour 1,350
Favourable Variable oheads 325
Fixed overhead 750
Profit 1,724

Favourable Reconciliation unit contribution per unit total conrt


Budgeted contribution 600 3.85 2,310

Sales volume Variance 116


Sales price variance 121.50
2,548
Favourable Adverse
Material price 10
Adverse Usage 18

labour rate - 150


Efficiency 100
idle time -40

Favourable variable overhead


expenditure -35
efficiency 25
153 -225 -72
Contribution 2,476
less Fixed cost 750
Adverse Profit 1,725.50

Adverse

Favourable
Favourable

Favourable
1.25
600
750

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