Page 201 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 10. When the revised standard mix of the materials will not vary with the standard mix of the
materials?
(a) Both standard and actual mix of materials are different
(b) Standard mix of materials are greater than the actual mix of materials
(c) Both are equivalent to each other

(d) None of the above
11. Why labour efficiency variance is denominated in terms of standard rate?

(a) Actual rate is not a measure
(b) Standard rate is free from the demand and supply of labour force
(c) Actual measure is a measure of demand and supply of labour force

(d) None of the above
12. Sales value variance is mainly due to
(a) Price variance (b) Quantity variance
(c) Mix variance (d) (a) (b) & (c)

13. Variance is tool of standard costing in determining the deviations of the enterprise from the
early
(a) Estimates (b) Budgets
(c) Costs (d) Prices

14. The direct labour total variance is the difference between what the output should have cost
and what it did cost, in terms of
(a) Cash (b) Labour

(c) Material (d) None of these
15. The selling price variance is a measure of the effect on expected
(a) Price (b) Profi t
(c) Labour (d) None of these

9.3 Summary

There are two type of variances viz. cost variance and revenue variance.

Cost variance can be further classified into three categories: (a) Material Cost Variance
(b) Labour Cost Variance and (c) Overhead Variance
Revenue Variance includes Sales Variance.

The material cost variance is in between the standard material cost for actual production
in units and actual cost.
Material price variance is a variance in between two different prices viz. the standard price
and actual price of raw materials.
Materials Usage Variance = Standard Price × (Standard quantity of materials for actual
output – Actual quantity of materials used)

Material Sub-usage Variance = Standard Cost per unit (Standard Quantity – Revised
Standard Quantity).

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