Chap8 (E)

Managerial Accounting
Chapter 8
• Standard Costs
Instructor: Dr. Ha Phuoc Vu

Chapter 8
• Standard Costs
PowerPoint Authors:
Jon A. Booker, Ph.D., CPA, CIA
Charles W. Caldwell, D.B.A., CMA
Susan Coomer Galbreath, Ph.D., CPA
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
9-3
Standard Costs
Standards are benchmarks or “norms” for
measuring performance. In managerial accounting,
two types of standards are commonly used.
Quantity standards Price standards

specify how much of an specify how much
input should be used to should be paid for
make a product or each unit of the
provide a service. input.
Examples: Firestone, Sears, McDonald’s, hospitals,

construction, and manufacturing companies.
9-4
Standard Costs
Deviations from standards deemed significant
are brought to the attention of management, a
practice known as management by exception.
Standard
Amount
Direct
Material
Direct Manufacturing
Labor Overhead
Type of Product Cost

9-5
Variance Analysis Cycle

Take
Identify Receive corrective
questions explanations actions
Conduct next
Analyze period’s
variances operations
Prepare standard
cost performance
report
Begin
9-6
Setting Standard Costs

Accountants, engineers, purchasing
agents, and production managers
combine efforts to set standards that encourage
efficient future operations.
9-7
Setting Standard Costs

Should we use I recommend using practical
ideal standards that standards that are currently
require employees to attainable with reasonable
work at 100 percent and efficient effort.
peak efficiency?
Engineer Managerial Accountant

9-8
Learning Objective 1
Explain how direct

materials standards and
direct labor
standards are set.
9-9
Setting Direct Material Standards

Standard Price Standard
Per Unit Quantity Per Unit
Final, delivered Summarized in

cost of materials, a Bill of Materials.
net of discounts.
9-10
Setting Standards
Six Sigma advocates have sought to
eliminate all defects and waste, rather than
continually build them into standards.
As a result allowances for waste and

spoilage that are built into standards
should be reduced over time.
9-11
Setting Direct Labor Standards

This image cannot currently be display ed.
Standard Rate Standard Hours

Per Hour Per Unit
Often a single Use time and

rate is used that reflects motion studies for
the mix of wages earned. each labor operation.
9-12
Setting Variable Manufacturing

Overhead Standards
Price Quantity
Standard Standard
The rate is the The quantity is

variable portion of the the activity in the
predetermined overhead allocation base for
rate. predetermined overhead.
9-13
Standard Cost Card

A standard cost card for one unit of
product might look like this:
(1) (2) (1) x (2)
Standard Standard Standard
Quantity Price Cost
Inputs or Hours or Rate per Unit
Direct materials 3.0 lbs. $ 4.00 per lb. $ 12.00
Direct labor 2.5 hours 14.00 per hour 35.00
Variable mfg. overhead 2.5 hours 3.00 per hour 7.50
Total standard unit cost $ 54.50
9-14
Price and Quantity Standards

Price and quantity standards are
determined separately for two reasons:
The purchasing manager is responsible for raw

material purchase prices and the production manager
is responsible for the quantity of raw material used.
 The buying and using activities occur at different times.

Raw material purchases may be held in inventory for a
period of time before being used in production.
9-15
Price and Quantity Variances

Variance Analysis
Price Variance Quantity Variance
Difference between Difference between

actual price and actual quantity and
standard price standard quantity
9-16

Variance Analysis
•Materials price variance •Materials quantity variance

•Labor rate variance •Labor efficiency variance
•VOH rate variance •VOH efficiency variance
9-17

Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price

9-18

× × ×
Actual quantity is the amount of direct

materials, direct labor, and variable
manufacturing overhead actually used.
9-19

× × ×
Standard quantity is the standard quantity

allowed for the actual output of the period.
9-20

× × ×
Actual price is the amount actually

paid for the input used.
9-21

× × ×
Standard price is the amount that should

have been paid for the input used.
9-22

× × ×

(AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP)
AQ = Actual Quantity SP = Standard Price
AP = Actual Price SQ = Standard Quantity
9-23
Compute the direct

materials price and
quantity variances and
explain their significance.
9-24
Glacier Peak Outfitters – An Example

Glacier Peak Outfitters has the following direct
material standard for the fiberfill in its mountain
parka.
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs. of fiberfill were purchased and
used to make 2,000 parkas. The material cost a
total of $1,029.
Let’s calculate the material price and quantity
variances.
9-25
Material Variances Summary

× × ×
210 kgs. 210 kgs. 200 kgs.
× × ×
$4.90 per kg. $5.00 per kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000
Price variance Quantity variance

$21 favorable $50 unfavorable
9-26

× × ×
210 kgs. 210 kgs. 200 kgs.
× × kgs
$1,029  210 ×
$4.90 per kg. $5.00per
= $4.90 perkg
kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000

9-27

× × ×
210 kgs. 210 kgs. 200 kgs.
× 0.1 kg per parka ×
 2,000 parkas ×
$4.90 per kg. $5.00
= 200 per
kgs kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000

9-28
Material Variances:
Using the Factored Equations
Materials price variance
MPV = AQ (AP - SP)
= 210 kgs ($4.90/kg - $5.00/kg)
= 210 kgs (-$0.10/kg)
= $21 F
Materials quantity variance
MQV = SP (AQ - SQ)
= $5.00/kg (210 kgs-(0.1 kg/parka  2,000 parkas))
= $5.00/kg (210 kgs - 200 kgs)
= $5.00/kg (10 kgs)
= $50 U
9-29
Direct Materials Variances – Points

of Clarification
I need the price variance I’ll start computing
sooner so that I can better the price variance
identify purchasing problems. when material is
You accountants just don’t purchased rather
understand the problems that than when it’s used.
purchasing managers have.
9-30

of Clarification
The price variance is

Glacier purchased and
computed on the entire
used 210 kilograms.
quantity purchased.
How are the variances
computed if the amount The quantity variance
purchased differs from is computed only on
the amount used? the quantity used.
9-31

of Clarification
Materials Quantity Variance Materials Price Variance
Production Manager Purchasing Manager
The standard price is used to compute the quantity variance

so that the production manager is not held responsible for
the purchasing manager’s performance.
9-32

of Clarification
Your poor scheduling
I am not responsible for sometimes requires me to
this unfavorable material rush order material at a
quantity variance. higher price, causing
You purchased cheap unfavorable price variances.
material, so my people
had to use more of it.
9-33
Quick Check  Zippy
Hanson Inc. has the following direct material

standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 1,700 pounds of material were
purchased and used to make 1,000 Zippies. The
material cost a total of $6,630.
9-34
Hanson’s material price variance (MPV)

for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
9-35
Hanson’s material price variance (MPV)

for the week was:
b. $170 favorable.
d. $800 favorable.MPV = AQ(AP - SP)
MPV = 1,700 lbs. × ($3.90 - 4.00)
MPV = $170 Favorable
9-36
Hanson’s material quantity variance (MQV)

for the week was:
b. $170 favorable.
d. $800 favorable.
9-37
Hanson’s material quantity variance (MQV)

for the week was:
b. $170 favorable.
d. $800 favorable.
MQV = SP(AQ - SQ)
MQV = $4.00(1,700 lbs - 1,500 lbs)
MQV = $800 unfavorable
9-38

× × ×
1,700 lbs. 1,700 lbs. 1,500 lbs.
× × ×
$3.90 per lb. $4.00 per lb. $4.00 per lb.
= $6,630 = $ 6,800 = $6,000

9-39
Quick Check  Continued Zippy
Hanson Inc. has the following material standard to

manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 2,800 pounds of material were
purchased at a total cost of $10,920, and 1,700
pounds were used to make 1,000 Zippies.
9-40
Actual Quantity Actual Quantity

Purchased Purchased
× ×
Actual Price Standard Price
2,800 lbs. 2,800 lbs.
× ×
$3.90 per lb. $4.00 per lb.
= $10,920 = $11,200
Price variance increases

Price variance because quantity
$280 favorable purchased increases.
9-41
Actual Quantity
Used Standard Quantity
× ×
Standard Price Standard Price
1,700 lbs. 1,500 lbs.
× ×
$4.00 per lb. $4.00 per lb.
= $6,800 = $6,000
Quantity variance is
unchanged because
actual and standard Quantity variance
quantities are unchanged. $800 unfavorable
9-42
Compute the direct labor

rate and efficiency
variances and explain
their significance.
9-43
Glacier Peak Outfitters - An Example

labor standard for its mountain parka.
1.2 standard hours per parka at
$10.00 per hour
Last month, employees actually worked 2,500
hours at a total labor cost of $26,250 to make
2,000 parkas.
Let’s calculate the labor rate and efficiency
variances?
9-44
Labor Variances Summary

Actual Hours Actual Hours Standard Hours
× × ×
Actual Rate Standard Rate Standard Rate
2,500 hours 2,500 hours 2,400 hours
× × ×
$10.50 per hour $10.00 per hour. $10.00 per hour
= $26,250 = $25,000 = $24,000
Rate variance Efficiency variance

$1,250 unfavorable $1,000 unfavorable
9-45

× × ×
× $26,250× 2,500 hours ×
$10.50 per hour $10.00 per hour.
= $10.50 per hour $10.00 per hour
= $26,250 = $25,000 = $24,000

9-46

× × ×
× ×  2,000
1.2 hours per parka ×
$10.50 per hour parkas
$10.00 per hour.
= 2,400 hours $10.00 per hour
= $26,250 = $25,000 = $24,000

9-47
Labor Variances:
Using the Factored Equations
Labor rate variance
LRV = AH (AR - SR)
= 2,500 hours ($10.50 per hour – $10.00 per hour)
= 2,500 hours ($0.50 per hour)
= $1,250 unfavorable
Labor efficiency variance
LEV = SR (AH - SH)
= $10.00 per hour (2,500 hours – 2,400 hours)
= $10.00 per hour (100 hours)
9-48
Direct Labor Variances – Points of

Clarification
Production managers are Mix of skill levels
usually held accountable assigned to work tasks.
for labor variances
because they can
Level of employee
influence the:
motivation.
Quality of production
supervision.
Quality of training
provided to employees.
Production Manager
9-49
Direct Labor Variances – Points of

Clarification
I think it took more time
to process the
I am not responsible for materials because the
the unfavorable labor Maintenance
efficiency variance! Department has poorly
maintained your
You purchased cheap equipment.
material, so it took more
time to process it.
9-50
Hanson Inc. has the following direct labor

standard to manufacture one Zippy:
1.5 standard hours per Zippy at
$12.00 per direct labor hour
Last week, 1,550 direct labor hours were worked at a
total labor cost of $18,910 to make 1,000 Zippies.
9-51
Hanson’s labor rate variance (LRV) for the

week was:
b. $310 favorable.
d. $300 favorable.
9-52
Hanson’s labor rate variance (LRV) for the

week was:
b. $310 favorable.
LRV = AH(AR - SR)
LRV = 1,550 hrs($12.20 - $12.00)
d. $300 favorable.LRV = $310 unfavorable
9-53
Hanson’s labor efficiency variance (LEV)

for the week was:
b. $590 favorable.
d. $600 favorable.
9-54
Hanson’s labor efficiency variance (LEV)

for the week was:
b. $590 favorable.
d. $600 favorable.
LEV = SR(AH - SH)
LEV = $12.00(1,550 hrs - 1,500 hrs)
LEV = $600 unfavorable
9-55

× × ×
× × ×
$12.20 per hour $12.00 per hour $12.00 per hour
= $18,910 = $18,600 = $18,000

$310 unfavorable $600 unfavorable
9-56
Compute the variable

manufacturing overhead
rate and efficiency
variances.
9-57
Glacier Peak Outfitters – An Example

variable manufacturing overhead labor standard
for its mountain parka.
1.2 standard hours per parka
at $4.00 per hour
Last month, employees actually worked 2,500
hours to make 2,000 parkas. Actual variable
manufacturing overhead for the month was
$10,500.
9-58
Variable Manufacturing Overhead

Variances Summary
× × ×
× × ×
= $10,500 = $10,000 = $9,600

9-59

Variances Summary
× × ×
× $10,500 ×
 2,500 hours ×
$4.20 per hour $4.00 per per
= $4.20 hourhour $4.00 per hour
= $10,500 = $10,000 = $9,600

9-60

Variances Summary
× × ×
× ×  2,000
1.2 hours per parka ×
$4.20 per hour parkas = 2,400
$4.00 hours
per hour $4.00 per hour
= $10,500 = $10,000 = $9,600

9-61

Variances: Using Factored Equations
Variable manufacturing overhead rate variance
VMRV = AH (AR - SR)
= 2,500 hours ($4.20 per hour – $4.00 per hour)
= 2,500 hours ($0.20 per hour)
= $500 unfavorable
Variable manufacturing overhead efficiency variance
VMEV = SR (AH - SH)
= $4.00 per hour (2,500 hours – 2,400 hours)
= $4.00 per hour (100 hours)
= $400 unfavorable
9-62
Hanson Inc. has the following variable

manufacturing overhead standard to
manufacture one Zippy:
1.5 standard hours per Zippy at
$3.00 per direct labor hour
Last week, 1,550 hours were worked to make
1,000 Zippies, and $5,115 was spent for
variable manufacturing overhead.
9-63
Hanson’s rate variance (VMRV) for variable

manufacturing overhead for the week was:
b. $400 favorable.
d. $300 favorable.
9-64
Hanson’s rate variance (VMRV) for variable

manufacturing overhead for the week was:
b. $400 favorable.
VMRV = AH(AR - SR)
VMRV = 1,550 hrs($3.30 - $3.00)
d. $300 favorable. VMRV = $465 unfavorable
9-65
Hanson’s efficiency variance (VMEV) for

variable manufacturing overhead for the week
was:
b. $435 favorable.
d. $150 favorable.
9-66
Hanson’s efficiency variance (VMEV) for

variable manufacturing overhead for the week
was:
b. $435 favorable. 1,000 units × 1.5 hrs per unit
d. $150 favorable.
VMEV = SR(AH - SH)
VMEV = $3.00(1,550 hrs - 1,500 hrs)
VMEV = $150 unfavorable
9-67

× × ×
× × ×
= $5,115 = $4,650 = $4,500

9-68
Variance Analysis and Management

by Exception
Larger variances, in
How do I know dollar amount or as
which variances to a percentage of the
investigate? standard, are
investigated first.
9-69
A Statistical Control Chart

Warning signals for investigation
Favorable Limit
• •
• • •
Desired Value
• •
Unfavorable Limit •
•
1 2 3 4 5 6 7 8 9
Variance Measurements
9-70
Advantages of Standard Costs

Management by Promotes economy
exception and efficiency
Advantages
Enhances
Simplified responsibility
bookkeeping accounting
9-71
Potential Problems with Standard Costs

Emphasizing standards Favorable
may exclude other variances may
important objectives. be misinterpreted.
Potential
Problems
Standard cost Emphasis on
reports may negative may
not be timely. impact morale.
Invalid assumptions Continuous

about the relationship improvement may
between labor be more important
cost and output. than meeting standards.
Appendix 9A
Predetermine Overhead Rates and
Overhead Analysis in a Standard
Costing System
PowerPoint Authors:
9-73
Compute and interpret

the fixed overhead
budget and volume
variances.
9-74
Fixed Overhead Budget Variance

Actual Budgeted Fixed
Fixed Fixed Overhead
Overhead Overhead Applied
Budget
variance
Actual Budgeted
Budget
= fixed – fixed
variance
overhead overhead
9-75
Fixed Overhead Volume Variance

Volume
variance
Budgeted Fixed overhead
Volume
= fixed – applied to
variance
overhead work in process
9-76
Fixed Overhead Volume Variance

DH × FR SH × FR
Volume
variance
Volume variance = FPOHR × (DH – SH)
FPOHR = Fixed portion of the predetermined overhead rate

DH = Denominator hours
SH = Standard hours allowed for actual output
9-77
Computing Fixed Overhead Variances
ColaCo
Production and Machine-Hour Data
Budgeted production 30,000 units
Standard machine-hours per unit 3 hours
Budgeted machine-hours 90,000 hours
Actual production 28,000 units
Standard machine-hours allowed for the actual production 84,000 hours
Actual machine-hours 88,000 hours
9-78
Computing Fixed Overhead Variances

ColaCo
Cost Data
Budgeted variable manufacturing overhead $ 90,000
Budgeted fixed manufacturing overhead 270,000
Total budgeted manufacturing overhead $ 360,000
Actual variable manufacturing overhead $ 100,000

Actual fixed manufacturing overhead 280,000
Total actual manufacturing overhead $ 380,000
9-79
Predetermined Overhead Rates

Predetermined Estimated total manufacturing overhead cost
=
overhead rate Estimated total amount of the allocation base
Predetermined $360,000
=
overhead rate 90,000 Machine-hours
Predetermined
= $4.00 per machine-hour
overhead rate
9-80
Predetermined Overhead Rates

Variable component of the $90,000
=
predetermined overhead rate 90,000 Machine-hours
Variable component of the

predetermined overhead rate
Fixed component of the $270,000

=
predetermined overhead rate 90,000 Machine-hours
Fixed component of the

predetermined overhead rate
9-81
Applying Manufacturing Overhead
Overhead Predetermined Standard hours allowed

= ×
applied overhead rate for the actual output
Overhead $4.00 per

= × 84,000 machine-hours
applied machine-hour
Overhead
= $336,000
applied
9-82
Computing the Budget Variance

Actual Budgeted
Budget
= fixed – fixed
variance
overhead overhead
Budget
= $280,000 – $270,000
variance
Budget
= $10,000 Unfavorable
variance
9-83
Computing the Volume Variance

Budgeted Fixed overhead
Volume
= fixed – applied to
variance
overhead work in process
Volume
variance
= $270,000 – ( $3.00 per
machine-hour
×
84,000
)
machine-hours
Volume
= $18,000 Unfavorable
variance
9-84
Computing the Volume Variance

Volume variance = FPOHR × (DH – SH)
FPOHR = Fixed portion of the predetermined overhead rate

DH = Denominator hours
SH = Standard hours allowed for actual output
Volume
variance
$3.00 per
= machine-hour × ( 90,000
machine-hours
84,000
)
– machine-hours
Volume = $18,000 Unfavorable

variance
9-85
A Pictorial View of the Variances

Actual Budgeted Fixed Overhead
Fixed Fixed Applied to
Overhead Overhead Work in Process
$280,000 $270,000 $252,000
Budget variance, Volume variance,

Total variance, $28,000 unfavorable

9-86
ColaCo: A Graphic Analysis of the

Variances
Let’s look at a graph

showing fixed
overhead variances.
We will use ColaCo’s
numbers from the
previous example.
9-87
ColaCo: A Graphic Analysis of the Variances
Budget
$270,000
Denominator
hours
0
0 Machine-hours (000) 90
9-88

Actual
$280,000
Budget { Budget Variance 10,000 U
$270,000
Denominator
hours
0
0 Machine-hours (000) 90
9-89

Actual
$280,000
Budget { Budget Variance 10,000 U
$270,000
Applied { Volume Variance 18,000 U
$252,000
Standard Denominator
hours hours
0
0 Machine-hours (000) 84 90
9-90
ColaCo: Reconciling Overhead Variances and

Underapplied or Overapplied Overhead
In a standard
cost system:
Unfavorable Favorable
variances are equivalent variances are equivalent
to underapplied overhead. to overapplied overhead.
The sum of the overhead variances

equals the under- or overapplied
overhead cost for the period.
9-91
ColaCo: Reconciling Overhead Variances and

Underapplied or Overapplied Overhead
ColaCo
Computation of Underapplied Overhead
Predetermined overhead rate (a) $ 4.00 per machine-hour
Standard hours allowed for the actual output (b) 84,000 machine hours
Manufacturing overhead applied (a) × (b) $ 336,000
Actual manufacturing overhead $ 380,000
Manufacturing overhead underapplied or
overapplied $ 44,000 underapplied
9-92
Computing the Variable Overhead

Variances
Variable manufacturing overhead rate variance

VMRV = (AH × AR) – (AH × SR)
= $100,000 – (88,000 hours × $1.00 per hour)
9-93
Computing the Variable Overhead

Variances
Variable manufacturing overhead efficiency variance

VMEV = (AH × SR) – (SH × SR)
= $88,000 – (84,000 hours × $1.00 per hour)
9-94
Computing the Sum of All Variances
ColaCo
Computing the Sum of All variances
Variable overhead rate variance $ 12,000 U
Variable overhead efficiency variance 4,000 U
Fixed overhead budget variance 10,000 U
Fixed overhead volume variance 18,000 U
Total of the overhead variances $ 44,000 U
Appendix 9B
General Ledger Entries to Record
Variances
PowerPoint Authors:
9-96
Prepare journal entries to

record standard costs
and variances.
9-97
Glacier Peak Outfitters - Revisited

We will use information from the Glacier Peak Outfitters
example presented earlier in the chapter to illustrate journal
entries for standard cost variances. Recall the following:
Material Labor
AQ × AP = $1,029 AH × AR = $26,250
AQ × SP = $1,050 AH × SR = $25,000
SQ × SP = $1,000 SH × SR = $24,000
MPV = $21 F LRV = $1,250 U
MQV = $50 U LEV = $1,000 U
Now, let’s prepare the entries to record

the labor and material variances.
9-98
Recording Material Variances

GENERAL JOURNAL Page 4
Post.
Date Description Ref. Debit Credit
Raw Materials 1,050
Materials Price Variance 21
Accounts Payable 1,029
To record the purchase of material
Work in Process 1,000

Materials Quantity Variance 50
Raw Materials 1,050
To record the use of material
9-99
Recording Direct Labor Variances
GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process 24,000
Labor Rate Variance 1,250
Labor Efficiency Variance 1,000
Wages Payable 26,250
To record direct labor
9-100
Cost Flows in a Standard Cost System

Inventories are recorded at standard cost.
Variances are recorded as follows:
 Favorable variances are credits, representing
savings in production costs.
 Unfavorable variances are debits, representing
excess production costs.
Standard cost variances are usually closed out
to cost of goods sold.
 Unfavorable variances increase cost of goods sold.
 Favorable variances decrease cost of goods sold.
9-101
End of Chapter 8

Chap8 (E)

Uploaded by

Copyright:

Available Formats

You might also like

Chap8 (E)

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chap8 (E)

Uploaded by

Copyright:

Available Formats

Managerial Accounting

Instructor: Dr. Ha Phuoc Vu

Quantity standards Price standards

Examples: Firestone, Sears, McDonald’s, hospitals,

Type of Product Cost

Variance Analysis Cycle

Setting Standard Costs

Setting Standard Costs

Engineer Managerial Accountant

Explain how direct

Setting Direct Material Standards

Final, delivered Summarized in

As a result allowances for waste and

Setting Direct Labor Standards

Standard Rate Standard Hours

Often a single Use time and

Setting Variable Manufacturing

The rate is the The quantity is

Standard Cost Card

Price and Quantity Standards

The purchasing manager is responsible for raw

 The buying and using activities occur at different times.

Price and Quantity Variances

Price Variance Quantity Variance

Difference between Difference between

Price and Quantity Variances

Price Variance Quantity Variance

•Materials price variance •Materials quantity variance

Price and Quantity Variances

Price Variance Quantity Variance

Price and Quantity Variances

Price Variance Quantity Variance

Actual quantity is the amount of direct

Price and Quantity Variances

Price Variance Quantity Variance

Standard quantity is the standard quantity

Price and Quantity Variances

Price Variance Quantity Variance

Actual price is the amount actually

Price and Quantity Variances

Price Variance Quantity Variance

Standard price is the amount that should

Price and Quantity Variances

Price Variance Quantity Variance

Compute the direct

Glacier Peak Outfitters – An Example

Material Variances Summary

Price variance Quantity variance

Material Variances Summary

Price variance Quantity variance

Material Variances Summary

Price variance Quantity variance

Direct Materials Variances – Points

Direct Materials Variances – Points

The price variance is

Direct Materials Variances – Points

Production Manager Purchasing Manager

The standard price is used to compute the quantity variance