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27 Cards in this Set
- Front
- Back
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Flexible budget variances |
A flexible budget variance is any difference between the results generated by a flexible budget model and actual results. the flexible budget amounts used are based on the price and quantity of the input allowed for the actual production.. AKA . Manufacturing input variances.The quantity variance plus the price variance equals the flexible budget variance. |
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Manufacturing input variances treatment at period end |
manufacturing input variances are closed out at the end of each period to cost ofsales or,if material, they are prorated among cost of sales, finished goods inventory, work in processinventory and, for direct material variances only, direct materials inventory. |
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Level 2 variance report |
Sales variances are Level 2 variances. In its variable manufacturing costs section, a Level 2 salesvariance report presents the total flexible budget variance for variable manufacturing costs for units sold. |
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Level 3 variance report |
A production variance report,is required to present the detail behind the totalflexible budget variance. However, a production variance report includes all units produced, whether theywere sold or remained in inventory as unsold units at the end of the period. |
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Price Variance formula |
(AP – SP) × AQ (Actual Price - Standard Price) × Actual Quantity |
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Quantity Variance Formula |
(AQ – SQ) × SP (Actual Quantity − Standard Quantity for Actual Output) × Standard Price |
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Materials purchase price variance |
The purchase price variance is the difference between the actual price paid to buy an item and its standard price, multiplied by the actual number of units purchased |
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Materials purchase price variance Formula |
(AP - SP) × AQ (Actual price - Standard price) x Actual quantity = Purchase price variance. The quantity of direct materials purchased, not the quantity of direct materials used. |
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Accounting for Materials Purchase Price Variances |
Direct materials purchase: Dr. inventory by STD cost CR. Accounts Payable ACTUAL cost Diff. goes to MaterialsPurchase Price Variance account. Put into production: Dr. WIP by ACTUAL material shouldve used Cr. Inventory by actual material alllowed Diff. goes Materials Quantity Variance account |
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Accounting for Materials Price Usage Variances |
Direct materials purchase: Dr. Inventory by ACTUAL cost Cr. Account Payable ACTUAL cost Put into production: Dr. WIP STD cost of materialsshouldve used Cr. Inventory by actual cost of actual material used Diff. Dr. or Cr. to the Materials Quantity Variance account andDr. or Cr. to the Materials Price Usage Variance account, as appropriate. |
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Direct Labor Rate Variance Formula |
(AP – SP) × AQ (Actual Rate – Standard Rate) × Actual Hours |
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Direct Labor Efficiency Variance Formula |
(AQ – SQ) × SP (Actual Hours − Standard Hours for Actual Output) × Standard Rate |
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Accounting for Direct Labor Variances in a Standard Cost System |
The production payroll is recorded by debiting Work-In-Process Inventory for the total number of standard hours for the units manufactured at the standard hourly rate. The credit is to accrued payroll at the total number of hours actually spent and at the actual hourly rate. The difference between the two is recorded in the Direct Labor Rate Variance (the price variance) and the Direct Labor Efficiency Variance (the quantity variance) accounts. For both the Rate Variance and the Efficiency Variance, unfavorable variances are recorded as debits and favorable variances are recorded as credits. |
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Mix variance |
shows the portion of the quantity variance that resulted because the actual mix was different from the standard mix (that is, more of one ingredient was used and less of another ingredient was used). |
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Yield variance |
shows the portion of the quantity variance that resulted because the total actual amount of all ingredients used was different from the total standard amount. |
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Total Variance of a Weighted Mix |
AC - SC mix is the Total Actual Cost for labor or materials minus the Total Standard Cost for labor or materials. |
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weighted average standard price of the actual mix |
the actual quantity used for each input is multiplied by the standard cost for that input, the products are summed, and the sum is divided by the total volume of all inputs used. The result is the weighted average standard price of one unit of the actual mix. |
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weighted average standard price of the standard mix |
The standard quantity of each input allowed for the actual output is multiplied by the standard cost for each input, the results are summed, and the sum is divided by the total volume of all inputs allowed for the actual output. |
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The mix variance formula |
(waspAM – waspSM)53 × AQ Weighted Average Standard Price of the Actual Mix − Weighted Average Standard Price of the Standard Mix (both calculated using the Standard Price)xActual Quantity of all material or labor inputs |
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The Yield Variance |
The yield variance results from a difference between the total actual quantity of the inputs that were used to produce the actual output and the total standard quantity of inputs that should have been used to produce the actual output. |
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The Yield Variance Formula |
(AQ – SQ) × waspSM Actual Total Quantity of All Inputs – Standard Total Quantity of All Inputs×Weighted Average Standard Price of Standard Mix of All Inputsor |
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Cost Allocation Base |
The amount of overhead costs to be applied to each unit produced is usually based on the standard usage allowed per unit of a cost allocation base. The standard usage allowed for a reporting period is the usage of the allocation base allowed for the actual production level achieved during the period. |
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Overhead Allocation Rate |
predetermined at the beginning of the period by dividing the total budgeted overhead cost by the budgeted usage of the allocation base or by the budgeted production level in units |
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Total Overhead Variance |
Actual total variable and fixed overhead incurred (money actually spent on these items) – Total variable and fixed overhead applied to production using predetermined rates = Total Overhead Variance |
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Total variable overhead variance |
Variable overhead spending variance + Variable overhead efficiency variance = Total variable overhead variance |
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Total fixed overhead variance |
Fixed overhead spending variance + Fixed overhead production volume variance = Total fixed overhead variance |
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Variable overhead spending variance |
Actual total variable overhead incurred (money actually spent) (AP x AQ) – Budgeted variable overhead based on inputs actually used (SP x AQ) = Variable overhead spending variance |
