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Week 4 Chapter 10- Further variance

analysis
Idle time variance can only be favourable in systems where expected idle time is recognised.
Favourable – efficient purchases of materials, good maintenance. Adverse – excessive
machine downtime/breakdowns, supply chain issues, worker illness.
Fixed overhead volume. Favourable – output higher than expected – over absorption.
Adverse – output lower than expected – under absorption.
Favourable change in material price variance is only beneficial if the change was not to the
detriment of our other variances.
Some variances are uncontrollable to an extent and therefore do not require an investigation.
Adverse material price variance may not require investigation if it has clearly translated into a
favourable material usage variance – more expensive materials → more efficient usage.
Only if variance has had an overall negative effect on profit investigation would be a
necessity.
Standard costing is best suited for environments that are stable.
Idle time variance = idle time (in hours) x standard cost of labour per hour.