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
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
machine breakdown, non ability material, illness
Conversion cost is total of: Options Direct material and direct wages Direct material, direct wages, and production overheads Direct wages and production overheads. None of the above
Favourable variance is that variance which is good for business while unfavourable variance is bad for business
what are some of the causes of material quntity variance of favourable amount
A favorable direct materials efficiency variance indicates that you are using less material in production than was budgeted for.
Some causes of direct material quantity variance are poor quality materials, untrained workers, and lack of supervision. Production managers should look at and determine the causes.
Since actual usage of the direct material was greater than the standard allowed, the excess usage is called an unfavorable variance
Material usage variance can be caused due to waste. Quality issues, such as defects, can result in material usage variance.
The material cost variance denoting the difference between the standard cost of materials and actual cost of matrials. The material cost variance is between the standard material cost for actual production in units and actual cost. The total cost is usually determined by two differenct factors of influence viz quantity of materials utilized/ required and price of the materials. The fluctuations in the material cost are only due to the fluctuations in the utility of materials due to many factors. Material cost variance can be computed into two different ways: DIRECT METHOD AND INDIRECT METHOD material cost variance= Standard cost of materials for actual output- actual cost of raw materials. MCV=(S Q AO X SP)-(AQ X AP) Indirect Method: material cost variance= Material price variance (MPV)+Material usage Variance
Changes in quality of inputs from manufacturer.
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
Direct labor rate variance is caused by a change in the hourly rate from what you initially planned.
It means the difference between the budgeted or estimated direct labour cost at the start of work activity with the actual direct labour cost at the end of activity or fiscal year. If budgeted cost is more then the actuall then it is favourable variance otherwise it is unfavourable direct labour cost variance
An unfavorable materials quantity variance means excessive use of direct materials. The excessive use of direct materials may be the result of a number of reasons including: inexperienced or untrained workers, lack of motivation, lack of proper supervision, use of outdated machinery, faulty equipment, purchase of unsuitable or substandard materials, and frequent power failures.
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.