Standard Cost: Chapter Eleven

Standard Cost
Chapter Eleven
10-2
Standard Costs
Standards are benchmarks or “norms”

for measuring performance. Two types
of standards are commonly used.
Quantity standards Cost (price)

specify how much of an standards specify
input should be used to how much should be
make a product or paid for each unit
provide a service. of the input.
10-3
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

10-4
Setting Standard Costs
Accountants, engineers, purchasing

agents, and production managers
combine efforts to set standards that encourage efficient
future production.
10-5
Setting Standard Costs
Should we use I recommend using practical

ideal standards that standards that are currently
require employees to attainable with reasonable and
work at 100 percent efficient effort.
peak efficiency?
Engineer Managerial
Accountant
10-6
Learning Objective 1
Explain how direct

materials standards
and direct labor
standards are set.
10-7
Setting Direct Material Standards
Price Quantity
Standards Standards
Final, delivered Summarized in

cost of materials, a Bill of Materials.
net of discounts.
10-8
Setting Standards
Six
Six Sigma
Sigma advocates
advocates have
have sought
sought to
to
eliminate
eliminate all
all defects
defects and
and waste,
waste, rather
rather than
than
continually
continually build
build them
them into
into standards.
standards.
As
As aa result
result allowances
allowances forfor waste
waste and
and
spoilage
spoilage that
that are
are built
built into
into standards
standards
should
should be
be reduced
reduced over
over time.
time.
10-9
Setting Direct Labor Standards
Rate Time
Standards Standards
Often a single Use time and

rate is used that reflects motion studies for
the mix of wages earned. each labor operation.
10-10
Setting Variable Overhead Standards
Rate Activity
Standards Standards
The rate is the The activity is the

variable portion of the base used to calculate
predetermined overhead the predetermined
rate. overhead.
10-11
Standard Cost Card – Variable Production Cost
A standard cost card for one unit of product might

look like this:
A B AxB
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
10-12
Standards vs. Budgets
Are standards the A standard is a

per unit cost.
same as budgets?
A budget is set for Standards are
often used when
total costs. preparing
budgets.
10-13
Price and Quantity Standards
Price and and quantity standards are

determined separately for two reasons:
 The
 The purchasing
purchasing manager
manager is is responsible
responsible for
for raw
raw
material
material purchase
purchase prices
prices andand the
the production
production
manager
manager isis responsible
responsible for
for the
the quantity
quantity of
of raw
raw
material
material used.
used.
 The
 The buying
buying and
and using
using activities
activities occur
occur at
at different
different
times.
times. Raw
Raw material
material purchases
purchases maymay be
be held
held in
in
inventory
inventory for
for aa period
period of
of time
time before
before being
being used
used in
in
production.
production.
10-14
A General Model for Variance Analysis
Variance Analysis
Price Variance Quantity Variance
Difference between Difference between

actual price and actual quantity and
standard price standard quantity
10-15
Variance Analysis
Materials price variance Materials quantity variance

Labor rate variance Labor efficiency variance
VOH spending variance VOH efficiency variance
10-16
Actual Quantity Actual Quantity Standard Quantity

× - × - ×
Actual Price Standard Price Standard Price

10-17

× - × - ×
Actual quantity is the amount of direct

materials, direct labor, and variable
manufacturing overhead actually used.
10-18

× - × - ×
Standard quantity is the standard quantity

allowed for the actual output of the period.
10-19

× - × - ×
Actual price is the amount actually

paid for the input used.
10-20

× - × - ×
Standard price is the amount that should have

been paid for the input used.
10-21

× - × - ×
(AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP)

AQ = Actual Quantity SP = Standard Price
AP = Actual Price SQ = Standard Quantity
10-22
Compute the direct

materials price and
quantity variances and
explain their
significance.
10-23
Material Variances 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.
10-24
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
10-25

× - × - ×
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

10-26

× - × - ×
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

10-27
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
10-28
Isolation of Material Variances
I’ll start computing

I need the price variance
sooner so that I can better
the price variance
identify purchasing problems. when material is
You accountants just don’t purchased rather than
understand the problems that when it’s used.
purchasing managers have.
10-29
Material Variances
The price variance is

Hanson purchased and
computed on the entire
used 1,700 pounds.
quantity purchased.
How are the variances
computed if the amount The quantity variance is
purchased differs from computed only on the
the amount used? quantity used.
10-30
Responsibility for Material Variances
Materials Quantity Variance Materials Price Variance
Production Manager Purchasing Manager
The
The standard
standard price
price is
is used
used to
to compute
compute the
the quantity
quantity variance
variance
so
so that
that the
the production
production manager
manager isis not
not held
held responsible
responsible for
for
the
the purchasing
purchasing manager’s
manager’s performance.
performance.
10-31
Responsibility for Material Variances
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
unfavorable price variances.
You purchased cheap
material, so my people
had to use more of it.
10-32
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.
10-33
Hanson’s
Hanson’s material
material price
price variance
variance (MPV)
(MPV)
for
for the
the week
week was:
was:
a.
a. $170
$170 unfavorable.
unfavorable.
b.
b. $170
$170 favorable.
favorable.
c.
c. $800
$800 unfavorable.
unfavorable.
d.
d. $800
$800 favorable.
favorable.
10-34
Hanson’s
Hanson’s material
material price
price variance
variance (MPV)
(MPV)
for
for the
the week
week was:
was:
a.
a. $170
$170 unfavorable.
unfavorable.
b.
b. $170
$170 favorable.
favorable.
c.
c. $800
$800 unfavorable.
unfavorable.
d.
d. $800
$800 favorable.
favorable. MPV = AQ(AP - SP)
MPV = 1,700 lbs. × ($3.90 - 4.00)
MPV = $170 Favorable
10-35
Hanson’s
Hanson’s material
material quantity
quantity variance
variance (MQV)
(MQV)
for
for the
the week
week was:
was:
a.
a. $170
$170 unfavorable.
unfavorable.
b.
b. $170
$170 favorable.
favorable.
c.
c. $800
$800 unfavorable.
unfavorable.
d.
d. $800
$800 favorable.
favorable.
10-36
Hanson’s
Hanson’s material
material quantity
quantity variance
variance (MQV)
(MQV)
for
for the
the week
week was:
was:
a.
a. $170
$170 unfavorable.
unfavorable.
b.
b. $170
$170 favorable.
favorable.
c.
c. $800
$800 unfavorable.
unfavorable.
d.
d. $800
$800 favorable.
favorable.
MQV = SP(AQ - SQ)

MQV = $4.00(1,700 lbs - 1,500 lbs)
MQV = $800 unfavorable
10-37

× - × - ×
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

10-38
Quick Check  Continued Zippy
Hanson Inc. has the following material standard to

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.
10-39
Actual Quantity Actual Quantity

Purchased Purchased
× - ×
Actual
2,800Price
lbs. Standard Price
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.
10-40
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 $800 unfavorable
unchanged.
10-41
Compute the direct

labor rate and
efficiency variances
and explain
their significance.
10-42
Labor Variances Example
Glacier Peak Outfitters has the following direct 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.
10-43
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
10-44

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

10-45

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

10-46
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)
= $1,000 unfavorable
10-47
Responsibility for Labor Variances
Production managers are Mix of skill levels

usually held accountable assigned to work
for labor variances tasks.
because they can
influence the: Level of employee
motivation.
Quality of production
supervision.
Quality of training
provided to
Production Manager employees.
10-48
Responsibility for
Labor Variances
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
You purchased cheap maintained your
material, so it took more equipment.
time to process it.
10-49
Hanson Inc. has the following direct labor standard to

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.
10-50
Hanson’s
Hanson’s labor
labor rate
rate variance
variance (LRV)
(LRV) for
for the
the week
week
was:
was:
a.
a. $310
$310 unfavorable.
unfavorable.
b.
b. $310
$310 favorable.
favorable.
c.
c. $300
$300 unfavorable.
unfavorable.
d.
d. $300
$300 favorable.
favorable.
10-51
Hanson’s
Hanson’s labor
labor rate
rate variance
variance (LRV)
(LRV) for
for the
the week
week
was:
was:
a.
a. $310
$310 unfavorable.
unfavorable.
b.
b. $310
$310 favorable.
favorable.
c.
c. $300
$300 unfavorable.
unfavorable.
LRV = AH(AR - SR)
d. $300 favorable.
d. $300 favorable. LRV = 1,550 hrs($12.20 - $12.00)
LRV = $310 unfavorable
10-52
Hanson’s
Hanson’s labor
labor efficiency
efficiency variance
variance (LEV)
(LEV)
for
for the
the week
week was:
was:
a.
a. $590
$590 unfavorable.
unfavorable.
b.
b. $590
$590 favorable.
favorable.
c.
c. $600
$600 unfavorable.
unfavorable.
d.
d. $600
$600 favorable.
favorable.
10-53
Hanson’s
Hanson’s labor
labor efficiency
efficiency variance
variance (LEV)
(LEV)
for
for the
the week
week was:
was:
a.
a. $590
$590 unfavorable.
unfavorable.
b.
b. $590
$590 favorable.
favorable.
c.
c. $600
$600 unfavorable.
unfavorable.
d.
d. $600
$600 favorable.
favorable.
LEV = SR(AH - SH)

LEV = $12.00(1,550 hrs - 1,500 hrs)
LEV = $600 unfavorable
10-54

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

$310 unfavorable $600 unfavorable
10-55
Compute the variable

manufacturing
overhead spending and
efficiency variances.
10-56
Variable Manufacturing Overhead Variances
Example
Glacier Peak Outfitters has the following direct 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.
10-57
Summary

× - × - ×
× × ×
= $10,500 = $10,000 = $9,600
Spending variance Efficiency variance

10-58
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

10-59
Summary

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

10-60
Variable Manufacturing Overhead Variances:
Using Factored Equations
Variable manufacturing overhead spending variance

VMSV = 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
10-61
Quick Check 
Zippy
Hanson Inc. has the following variable manufacturing

overhead standard to
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.
10-62
Quick Check 
Zippy
Hanson’s
Hanson’s spending
spending variance
variance (VOSV)
(VOSV) for
for variable
variable
manufacturing
manufacturing overhead
overhead for
for
the
the week
week was:
was:
a.
a. $465
$465 unfavorable.
unfavorable.
b.
b. $400
$400 favorable.
favorable.
c.
c. $335
$335 unfavorable.
unfavorable.
d.
d. $300
$300 favorable.
favorable.
10-63
Quick Check 
Zippy
Hanson’s
Hanson’s spending
spending variance
variance (VOSV)
(VOSV) for
for variable
variable
manufacturing
overhead for
for
the
the week
week was:
was:
a.
a. $465
$465 unfavorable.
unfavorable.
b.
b. $400
$400 favorable.
favorable.
c.
c. $335
$335 unfavorable.
unfavorable.
d.
d. $300
$300 favorable.
favorable. VOSV = AH(AR - SR)
VOSV = 1,550 hrs($3.30 - $3.00)
VOSV = $465 unfavorable
10-64
Quick Check 
Zippy
Hanson’s
Hanson’s efficiency
efficiency variance
variance (VOEV)
(VOEV) for
for variable
variable
manufacturing
overhead for
for the
the week
week was:
was:
a.
a. $435
$435 unfavorable.
unfavorable.
b.
b. $435
$435 favorable.
favorable.
c.
c. $150
$150 unfavorable.
unfavorable.
d.
d. $150
$150 favorable.
favorable.
10-65
Quick Check 
Zippy
Hanson’s
Hanson’s efficiency
efficiency variance
variance (VOEV)
(VOEV) for
for variable
variable
manufacturing
overhead for
for the
the week
week was:
was:
a.
a. $435
$435 unfavorable.
unfavorable.
b.
b. $435
$435 favorable.
favorable.
c.
c. $150
$150 unfavorable.
unfavorable. 1,000 units × 1.5 hrs per unit
d.
d. $150
$150 favorable.
favorable.
VOEV = SR(AH - SH)

VOEV = $3.00(1,550 hrs - 1,500 hrs)
VOEV = $150 unfavorable
10-66
Quick Check 
Zippy

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

10-67
Variance Analysis and
Management by Exception
Larger variances,
How do I know in dollar amount
which variances or as a percentage
to investigate? of the standard,
are investigated
first.
10-68 Exhibit
10-9
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
10-69
Compute delivery cycle

time, throughput time,
and manufacturing
cycle efficiency (MCE).
10-70
Delivery Performance Measures
Order Production Goods

Received Started Shipped
Process Time + Inspection Time

Wait Time + Move Time + Queue Time
Throughput Time
Delivery Cycle Time
Process time is the only value-added time.

10-71
Delivery Performance Measures
Order Production Goods

Received Started Shipped
Process Time + Inspection Time

Wait Time + Move Time + Queue Time
Throughput Time
Delivery Cycle Time

Manufacturing
Value-added time
Cycle =
Efficiency Manufacturing cycle time
10-72
Quick Check 
A
A TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the throughput
throughput time?
time?
a.
a. 10.4
10.4 days
days
b.
b. 0.20.2 days
days
c.
c. 4.14.1 days
days
d.
d. 13.4
13.4 days
days
10-73
Quick Check 
A
A TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the throughput
throughput time?
time?
a.
a. 10.4
10.4 days
days
b.
b. 0.2
0.2 days
days
Throughput
c. time = Process + Inspection + Move + Queue
c. 4.1
4.1 days
days
= 0.2 days + 0.4 days + 0.5 days + 9.3 days
d.
d. 13.4
13.4 days
days = 10.4 days
10-74
Quick Check 
A
A TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the Manufacturing
Manufacturing Cycle
Cycle Efficiency?
Efficiency?
a.
a. 50.0%
50.0%
b.
b. 1.9%
1.9%
c.
c. 52.0%
52.0%
d.
d. 5.1%
5.1%
10-75
Quick Check 
AA TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the Manufacturing
Manufacturing Cycle
Cycle Efficiency?
Efficiency?
a.
a. 50.0%
50.0%
b.
b. 1.9%1.9% MCE = Value-added time ÷ Throughput time
c.
c. 52.0%
52.0% = Process time ÷ Throughput time
d.
d. 5.1%5.1% = 0.2 days ÷ 10.4 days
= 1.9%
10-76
Quick Check 
A
A TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the delivery
delivery cycle
cycle time?
time?
a.
a. 0.50.5 days
days
b.
b. 0.70.7 days
days
c.
c. 13.4
13.4 days
days
d.
d. 10.4
10.4 days
days
10-77
Quick
Delivery cycle time Check
= Wait time + 
Throughput time
= 3.0 days + 10.4 days
= 13.4 days
A
A TQM
TQM team
team at
at Narton
Narton Corp
Corp has
has recorded
recorded the
the following
following
average
average times
times for
for production:
production:
Wait
Wait 3.0
3.0 days
days Move
Move 0.5
0.5 days
days
Inspection
Inspection 0.4
0.4 days
days Queue
Queue 9.39.3 days
days
Process
Process 0.2
0.2 days
days
What
What is
is the
the delivery
delivery cycle
cycle time?
time?
a.
a. 0.50.5 days
days
b.
b. 0.70.7 days
days
c.
c. 13.4
13.4 days
days
d.
d. 10.4
10.4 days
days
10-78
End of Chapter 10

Standard Cost: Chapter Eleven

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Standard Cost

Standards are benchmarks or “norms”

Quantity standards Cost (price)

Deviations from standards deemed significant

Type of Product Cost

Setting Standard Costs

Accountants, engineers, purchasing

Setting Standard Costs

Should we use I recommend using practical

Explain how direct

Setting Direct Material Standards

Final, delivered Summarized in

Setting Direct Labor Standards

Often a single Use time and

Setting Variable Overhead Standards

The rate is the The activity is the

Standard Cost Card – Variable Production Cost

A standard cost card for one unit of product might

Standards vs. Budgets

Are standards the A standard is a

Price and Quantity Standards

Price and and quantity standards are

A General Model for Variance Analysis

Price Variance Quantity Variance

Difference between Difference between

A General Model for Variance Analysis

Price Variance Quantity Variance

Materials price variance Materials quantity variance

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Actual quantity is the amount of direct

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Standard quantity is the standard quantity

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Actual price is the amount actually

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Standard price is the amount that should have

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

(AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP)

Compute the direct

Material Variances Example

Glacier Peak Outfitters has the following direct

Last month 210 kgs of fiberfill were purchased and

Material Variances Summary

Actual Quantity Actual Quantity Standard Quantity

Price variance Quantity variance

Material Variances Summary

Actual Quantity Actual Quantity Standard Quantity

Price variance Quantity variance

Material Variances Summary