Calculation of variances using formulae

Formulae

The calculation of variances can be undertaken using formulae. The disadvantages of using
formulae are that:

Materials

Material Price Variance = (Standard Price Actual Price)Actual

Quantity

Material Usage Variance = (Standard Quantity Actual Quantity)

Standard Price

Total Material Cost Variance = (Standard QuantityStandard Price)

(Actual QuantityActual Price)

Labour

Labour Rate Variance = (Standard Rate Actual Rate)Actual

Hours

Labour Efficiency Variance = (Standard Hours Actual Hours)

Standard Rate

Total Labour Cost Variance = (Standard RateStandard Hours)

(Actual RateActual Hours)

Variable overheads

Variable Overhead Expenditure = (Variable Overhead Absorption Rate

Variance Actual Hours) Actual Cost

Variable Overhead Efficiency = Variable Overhead Absorption

Variance Rate (Standard Hours Actual Hours)

Variable Overhead Cost = (Standard HoursVariable Overhead

Variance Absorption Rate) Actual Cost

Revenue

Sales Price Variance = (Actual Price Budgeted Price)Actual

Quantity

Sales Volume Variance = (Actual Quantity Budgeted Quantity)

Budgeted Price

Total Sales Revenue Variance = Actual Revenue Budgeted Revenue