MANAGEMENT ACCOUNTING 1

ASSIGNMENT FOR MODULE 3

As we all know that the three (3) components of Standard costing are
Direct Material, Labor Costs and the Factory Overhead which consist of
Variable and Fixed Overhead. Based on the Variance analysis please cite
the formula on the following: (60 points).
On Direct Material Variance:
1. Material Purchase Price Variance = (Actual price – Standard price) x
Quantity purchased.
2. Material Price Usage Variance = (Actual quantity – Standard quantity)
x Standard Price
3. Material Quantity/Usage Variance formula = (standard quantity of
material allowed for production – actual quantity used) × standard price
per unit of material
4. Material Mix Variance Formula = (Revised standard quantity – Actual
quantity) x Standard Quantity
5. Material Yield Variance = (Actual yield – Standard yield) x Standard
cost per unit
On Direct Labor
1. Direct Labor Rate/Price Variance Formula= (Standard Rate Per Hour
– Actual Rate Per Hour) x Actual Hours
2. Direct Labor Efficiency /Usage/Quantity Variance =
(Standard Hours for Actual Out Put – Actual Hours) x
Standard Rate

Formula 3. Direct Yield Variance Formula = (Actual hours –

Standard Hours) x Standard Rate
On Factory Overhead
1. Factory Overhead Controllable Variance = Actual Expenditure –
(Budgeted Expense incurred per unit x standard number of units)
2. Factory Overhead Volume Variance = (actual units produced -
budgeted production units) x budgeted overhead rate per unit
3. Factory Overhead Spending Variance = Actual hours x (Actual
variable overhead rate - Standard variable overhead rate)
4. Factory Overhead Idle Capacity Variance = Budgeted allowance based
on actual hours worked – (Actual hours worked × Standard overhead
rate)
5. Factory Overhead Efficiency Variance = (standard hours allowed for
production – actual hours taken) × standard overhead absorption rate per
hour
6. Factory Overhead Yield Variance = (Standard hours allowed for
expected output × Standard overhead rate) – (Standard hours allowed for
actual output × Standard overhead rate)
7. Variable Overhead Efficiency Variance = Standard overhead rate x
(Actual hours – Standard hours)