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What factors causes Budget Variance?
There are 7 variances associated with a budget ( which are generally calculated for controlling purposes) 1- Material Price variance 2- Material Quantity variance 3- Labor rate variance 4- Labor efficiency variance 5- Spending variance 6- Efficiency variance 7- Capacity variance
Why are variances generally segregated in terms of a price variance and an efficiency variance?
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
When computing standard cost variances the difference between actual and standard price multiplied by actual quantity yields what?
Price Variance
Why a favorable fixed overhead expenditure variance might be reported?
The price variance might result from use of cheaper but inferior quality materials hence though it will be cheaper , the final product will be compromised .
What difference between a favorable variance and an unfavorable variance?
Favourable variance is that variance which is good for business while unfavourable variance is bad for business
How do you calculate material price variances and what are the possible reasons for such variances?
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.
What is the difference between negative price variance and volume variance?
Negative price variance is when the cost is less than budgeted. Volume variance is a variance in the volume produce.
Why would a favorable price variance for material might be the cause of unfavorable quantity variance?
A favorable/unfavorable price variance does not effect your quantity variance. The reason you would see a favorable price variance and an unfavorable quantity variance is because you consumed more materials than your standard allows AND the price you paid for those material was less than your standard price. If you paid more than your standard price, you would have experienced an unfavorable variance in both quantity and price.
What causes a DM Price Variance?
There are a number of reasons for causinf DM Price Variance. Adverse Price Variance 1) Demand > Supply (Low Supply, High Demand result in price to be material purchase to be more costly) 2) Change to a higher grade material quality. 3) Purchases made from oversea, exchange rate incurred 4) Purchases made in smaller quantity As for favourable DM price variance, explanation will be opposite of the above given.
Why a favorable direct materials price variance might be of concern?
A favorable direct materials price variance may be the result of the purchase of cheaper materials that may be of inferior quality, thereby causing an inferior product. An inferior quality can also cause more spoilage and waste.
How do you compute market price variance?
Price Variance = (Actual Price/Unit - Budgeted Price/Unit) x Actual Quantity of Output = (AP - SP) x AQ
Why then should calculate a material price variance?
Material variance should be calculated to ensure that you are setting the right price for your products. When the price varies significantly, you may need to establish a new price for the product.
Is the materials price variance the least significant from a standpoint of cost control?
NO - Fixed Overhead Volume Variance
What is the difference between a sales volume variance and a sales price variance?
Volume is a change in how many products you sell Price is a change in how much you charge for the product
What factors causes Budget Variance?
There are 7 variances associated with a budget ( which are generally calculated for controlling purposes) 1- Material Price variance 2- Material Quantity variance 3- Labor rate variance 4- Labor efficiency variance 5- Spending variance 6- Efficiency variance 7- Capacity variance
Can you amortize goodwill?
You can no longer amortize goodwill. Instead you annually test it for impairment.
What is cost price variances?
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.
