Essay About Budgeted Values And Sp Yield Variance

Varience
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VARIANCE ANALYSIS
Variances are to be calculated for each department separately.
The standard/Budgeted values means the Budgeted Values for actual Output.
This Budget is called Flexible Budget ( How to Prepare?)
Variances are always the difference between values actually used and Budgeted
values for actual output.
All variances are in Dollars/Rupees.
Any Variance = Some Quantity * Some Price – Another quantity*another price.
For any Case, follow the following steps:
1) identify causes for the variance
2) Hold some Department to be responsible for it.
3) Suggest remedial, if possible
2 Golden Rules:
Cost Control is always done on Actual Output
Inefficiency of one department should never be attributed/overlapped to
another department.
VARIANCE OUTPUT
INPUT
SALES
Variance
MATERIAL
Variance LABOUR
Variance
OVERHEAD
Variance
USE AT YOUR OWN RISK
USE AT YOUR OWN RISK 2
MATERIAL VARIANCE:
AQ – ACTUAL Quantity
SQ – Standard Quantity
AP – ACTUAL Price
SP – Standard Price
SM – Standard Mix
AM – ACTUAL Mix
AO AQ AM AP
AO AQ AM SP Price Variance
AO AQ SM SP Mix Variance
AO SQ SM SP Yield Variance
Yield + Mix = Usage/Quantity Variance
MATERIAL VARIANCE
PRICE VARIANCE
AQ@AM*(AP – SP)
QUANTITY/USAGE
VARIANCE
SP*(AQ@AM-SQ@SM)
MIX VARIANCE
SP*(AQ@AM-AQ@SM)
YIELD VARIANCE
SP*(AQ@SM-SQ@SM)
USE AT YOUR OWN RISK
USE AT YOUR OWN RISK 3
LABOUR VARIANCE:
AH – ACTUAL Hours
SH – STANDARD Hours
AM – ACTUAL Mix
SM – STANDARD Mix
AR – ACTUAL Rate
SR – STANDARD Rate
AO AH AM AR
AO AH AM SR Rate Variance
AO AH SM SR Mix Variance
AO SH SM SR Efficiency Variance
Efficiency + Mix = Hours Variance
LABOUR VARIANCE
RATE VARIANCE
AH@AM*(AR – SR)
HOURS VARIANCE
SR*(AH@AM-SH@SM)
MIX VARIANCE
SR*(AH@AM-AH@SM)
EFFICIENCY VARIANCE
SR*(AH@SM-SH@SM)
USE AT YOUR OWN RISK
USE AT YOUR OWN RISK 4
Over Head Variance
1) 2 way method – If only Units produces is given
2) 3 way method – If Units as well as hours( Labour/Machine) are
given
Following are the variables involved
Budgeted Fixed Over Head – BFOH
Budgeted Variable Over Head Rate per Hour- $/Hour – BVOHR-H
Budget Variable OverHead Rate per unit – $/Unit – BVOHR-U
Budgeted Volume to be produced- BV
Actual Fixed Over Head – AFOH
Actual Variable Over Head – AVOH
Actual Volume produced-AV
Actual Labour Hours – ALH
Fixed Absorption Rate – FAR = (BFOH / BV)
Budget Equation BFOH + BVOHR-U * Units
2 Way Analysis
Fixed Variable
Actual AFOH AVOH
Fixed Spending Variance Variable Spending variance
Budgeted over head
for actual output
BFOH AV * BVOHR-U
Fixed Volume Variance Variable Volume variance =
Absorbed FAR * AV AV * BVOHR-U
USE AT YOUR OWN RISK
USE AT YOUR OWN RISK 5
OVERHEAD VARIANCE – 3 Way Analysis
Budgeted Fixed Over Head – BFOH
Budgeted Variable Over Head Rate per Hour- $/Hour – BVOHR-H
Budget Variable Over Head Rate per unit – $/Unit – BVOHR-U
Budgeted Volume to be produced- BV
Actual Fixed Over Head – AFOH
Actual Variable Over Head – AVOH
Actual Volume produced-AV
Actual