·

Chapter 10 C 11

for Direct Material :

I Variance
. analysis
factors such as
Quantity< Price >
-
determined cost
Input-outputrate
x Actual out
Actual Cost T

e
g: 10nnits
- -
standard Cost
AQp
-

Actual Quantity
.

<Ounits) AQU
$2
Standard
quantity (12 units)
Actual" standard
($1.5
X *
Price (
$28 ($1 5) SP
.

SP price
$15

AQ is constant SP is constant
>

only P determine cost

Only quantity determine cost
>
-

I >
-

-
-

Direct Material Price Variance Direct Material Variance

Usage
since AP)SP)
$1 5 x (12-10) $3 /favorable since AQCSQ(
$5 /Unfavourable
.
=

10 x ($2-$1 5)
.
=
( ) + 1 +)

Total Material variance = Actual Cost -

Standard cost
$2 =
$20 -

$18
(Unfavorable)

ActuallySpendmore
e

* For total
Unfavorable : Actual Cost(AC) Standard Cost (SC) >
-

favorable Actual Cost <Standard Cost (SC)

(AC) > Actually spend less than
material variance :
-

expected

total Material variance = Actual Cost -

Standard Cost (Expected)

Actuallypaymore
e

Actual Price (AP) Standard

Price (SP)
>
-

* For Direct Material unfavorable :

Actual Price (AP) <Standard Price (SP)

Price Variance favorable : >
-

Actually pay less than

expected
Spend
more

For Direct Material unfavorable : Actual Actually quantity used more

* Quantity (AQ)> Standard Quantity >
-

than expected
Variance
Usage favorable : Actual
Quantity (AQ) < Standard Quantity >
Actually quantity used
-

↳than expected .

-
> spend less by

Direct Material Price Variance AQpurchased

material
saving
=
SP
* Note : x

Direct Material Usage Variance AQused SP

=
x

Lefl
Increasing Increasing
Left
unfavorable
Right favorable Right