管理会计英文讲义 管理会计Session 13 Variances.pdf

Session 13 Variances Main contents: 1. Direct material variances 2. Direct labour cost variances 3. Variable OH variances 4. Fixed OH variances 5. Sales variances 6. Idle time variances 7. Reconciliation of cost Variances: A variance is the difference between a planned, budgeted, or standard cost and the actual cost incurred. The same comparisons may be made for revenues. The purpose by which the total difference between standard and actual results is analysed is known as variance analysis. When actual results are better than expected results, we have a favourable variance （F）If actual results are worse than expected results, we have an adverse variance. （A）. Types of variances: Variable cost variances: Material variances Labour variances Variable production overhead variances Fixed production overhead variances Sales variances Reasons for cost variance: Variance Favorable Adverse Material price Unforeseen discount received Price increase More care taken in purchase careless purchase Change in material standard change in material standard Material usage material used of higher quality defective material than standard more effective use made of material excessive waste errors in allocating material to jobs theft strict quality control errors in allocating material to jobs Labour rate use of apprentice or other workers at a rate of pay lower than standard the idle time variance is always adverse non-availability of material Idle time illness or injury to worker Machine breakdown Labour efficiency Output produced more quickly than Output lower than stan