Managerial Accounting Variances Review

Study Notes

Material Variances

Material Price Variance: Measures cost differences for materials; calculated by the difference between actual and budgeted material costs multiplied by actual quantity used.
Material Price Variance Formula: (Actual Price - Standard Price) * Actual Quantity.
Material Quantity Variance: Evaluates the discrepancy between actual and expected material usage, multiplied by the standard cost.
Material Quantity Variance Formula: (Actual Usage - Standard Usage) * Standard Cost.

Labor Variances

Labor Rate Variance: Represents the difference between actual labor costs and expected labor costs, calculated based on actual hours worked.
Labor Rate Variance Formula: (Actual Rate - Standard Rate) * Actual Hours Worked.
Labor Efficiency Variance: Assesses efficiency by comparing actual hours worked with standard hours expected for production, multiplied by the standard labor rate.
Labor Efficiency Variance Formula: (Actual Hours - Standard Hours) * Standard Rate.

Variable Overhead Variances

Variable Overhead Spending Variance: Indicates the difference between actual and budgeted variable overhead rates, multiplied by actual hours worked.
Variable Overhead Spending Variance Formula: (Actual Ovh. Rate - Standard Ovh. Rate) * Actual Hours.
Variable Overhead Efficiency Variance: Examines efficiency by comparing actual hours to budgeted hours worked, multiplied by the standard overhead rate.
Variable Overhead Efficiency Variance Formula: (Actual Hours - Standard Hours) * Standard Ovh. Rate.

Standard Quantity Allowance

Standard Quantity Allowed: Calculated as Actual Output multiplied by Standard Allowed, providing a benchmark for expected resource usage.

Description

This quiz covers key concepts related to variances in managerial accounting, focusing on material price and quantity variances. Get familiar with definitions and formulas used to calculate these variances. Ideal for accounting students looking to reinforce their understanding of the subject.