Price variance is the actual unit cost minus the standard unit cost, multiplied by the actual quantity purchased. The variance is said to be unfavorable if the actual price of the materials is higher than the standard price of the materials.
Price Variance
Price and quantity variances are computed respectively because different managers are usually responsible for buying and for using inputs.
True
Direct labor budget utilized to compare the actual direct labor cost and standard cost for specific task and for controlling purpose so that if there are variances those variances could be eliminated to bring the actual cost to budgeted cost.
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
Following are the causes of material price variance: 1.There could have been recent changes in purchase price of materials. 2.Price variance can be due to substituting raw materials different from the original material specification. 3.Price variance can be attributed to the non availability of cash discounts which was originally anticipated at the time of setting the price standards. 4.Changes in transportation costs and storekeeping costs can also be contributing factors to material price variance.
total master-budget variances
Receiving can affect direct materials price variances if there is no inventory. The accounting department will mark up prices to reflect a shortage.
define cost and selling price
should all variances be investigated
Selling price = Cost + Profit= Cost + Cost*30% = cost*(1.30) = 156*1.3 = 202.80Selling price = Cost + Profit= Cost + Cost*30% = cost*(1.30) = 156*1.3 = 202.80Selling price = Cost + Profit= Cost + Cost*30% = cost*(1.30) = 156*1.3 = 202.80Selling price = Cost + Profit= Cost + Cost*30% = cost*(1.30) = 156*1.3 = 202.80
The two variances between the actual cost and the standard cost for direct labor are the labor rate variance and the labor efficiency variance. The labor rate variance measures the difference between the actual hourly wage paid and the standard wage expected, multiplied by the actual hours worked. The labor efficiency variance assesses the difference between the actual hours worked and the standard hours allowed for the actual production, valued at the standard hourly rate. These variances help businesses analyze their labor costs and operational efficiency.