Variances Flashcards Preview

AAT Budgeting L4 AQ2016 > Variances > Flashcards

Flashcards in Variances Deck (12)
Loading flashcards...
1

Material usage variance (Top)

Standard qty of material used (actual production)

MINUS

actual qty of material used actual production

2

Material price variance (Bottom)

Standard cost of material used

MINUS

Actual cost of material used

3

Labour rate variance (Bottom)

Standard cost of actual hours

MINUS

Actual cost of actual hours

4

Labour efficiency variance (Top)

Standard hours for actual production

MINUS

Actual hours used at standard rate for actual production

5

Other performance indicators

- machine utilisation ratios (measure of capacity)
- material wastage

- idle time used
- reject rate

6

The meaning of material price variance

The part of material cost variance that is due to price of material differing from standard

7

The meaning of material usage variance

The part of material cost variance that is due to the quality of material used differing from standards

8

The meaning of labour rate variance

The part of the labour cost variance that is due to the labour rate differing from standard

9

The meaning of labour efficiency variance

The part of the labour cost variance that is due to the number of labour hours used differing from standard

10

Measuring performance - controllable costs

A possible method of measurement is variance analysis. However the cost centre manager is not responsible for fixed costs which aren’t controllable

11

Measuring performance - controllable profit

Profit margin or contribution to sales ratio as well as variance analysis.

12

Measuring performance - return on capital employed in an investment centre

Calculation of profit and of capital employed, profit margin/contribution to sales ratio and variances are used