Page 202 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 9: Variance Analysis

Material yield variance is one of the components of the material usage variance which Notes
arises only due to the deviation in between the standard yield determined and the actual
yield accrued.
Labour Variance Analysis, is studying the deviation in between the actual cost of the labour
incurred and standard/budgeted cost of the labour.

The overhead variance is defined is as the variance in between standard cost of overhead
estimated for the actual output and actual cost of overhead really incurred.

Sales variances is the only component accompanied the profit volume variance of the
business transaction. The sales variances are computed and analysed in order to study the
effect of sales value and facilitates the sales manager to easily understand the various sales
efforts taken by the team.

9.4 Keywords

Cost Variance: Identifying the deviations in between the actual cost and standard cost which was
already determined.
Favourable Cost Variance: It is due to greater standard cost over the actual cost.
Favourable Revenue Variance: It is due to greater actual revenue than the standards.
Revenue Variance: Identifying the deviations in between the actual revenue and early determined
standard revenue.
Standard: It is a predetermined or estimate figure calculated by considering the ideal conditions

of the work environment.
Unfavourable Cost Variance: It is due to greater actual cost than the determined standard cost.
Unfavourable Revenue Variance: It is an outcome due to greater standard sales than the actual
sales.
Variance: It is tool of standard costing in determining the deviations of the enterprise from the
early estimates.

9.5 Review Questions

1. Elucidate the various kinds of variances.
2. Write elaborately on the cost variance and their causes.

3. From the data given below, find out the material mix variance.

Consumption of 100 units of product
Raw Material Standard Actual
A 40 units @ ` 50 per unit 50 units @ ` 50 per unit
B 60 units @ ` 40 per unit 60 units @ ` 45 per unit
4. From the following data, calculate materials yield variance.

Particulars Standard Actual
Qty in Kg Price Qty in Kg Price
Material A 200 units ` 12 160 units ` 13
Material B 100 units ` 10 140 units ` 10
300 units 300 units
Standard loss allowed is 10% of input. Actual output is 275 units.

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