Variance Analysis

System · May 2003

Please can you help!!! I've been trying to revise the Price and Labour variances. I am struggling to remember the formula. Does anyone have any ideas or thoughts on how I can remember them. Please could you e-mail me at erica.cowley@ntlworld.com.

System · May 2003

Variance Analysis

The only real answer is practice - do as many questions as you can, again and again until it sticks. In the meantime, try and think about the logic behind the calculations rather than just looking at formulae. For example, the material price variance recognises that one influence on overall cost is the price at which we buy in materials. So compare the standard (or expected) price per kg to that actually paid. However much more or less we've paid, that has happened on every kg actually bought, so multiply the difference by the actual quantity. For material usage, ask how many kilograms should have been used for actual production, and see how that differs to actual usage. This difference is multiplied by standard rather than actual price (since you've already dealt with any price difference above). Finally, realise that the labour variances are just the same as the material variances, but with different names!

System · May 2003

Variance Analysis

Thank you Andy it is starting to make sense.

System · May 2003

Variance Analysis

The way I remember the formulae is like this: Usage variance is Using the SAS ie Standard Actual Standard, Price variance is Pricy South African Airways ie Standard Actual Actual. Sounds a bit mad but I find once I've remembered which bits to use I can do it. As Andy says the labour ones are then the same with different names.

System · May 2003

Variance Analysis

Hiya A very good friend of mine came up with the ingenious solution of P-U-R-E: Price, Usage, Rate, Efficiency. Everyone can remember total Variance of (act @ act) - (std @ std) Materials: P (act @ act) - (act @ std) U (act @ std) - (std @ std) Rate and Efficiency are now the same: Labour: R (act @ act) - (act @ std) E (act @ std) - (std @ std) Its really quite easy if you can remember it like this (well I think so) as it follows a pattern

Always try and do you total variance as it acts as a check for the variances. Hope this helps - I really do find variances easy now Think P-U-R-E thoughts in your exams! Mandy - x -

System · June 2003

Variance Analysis

im not sure if this makes it any easier but this is how ive remembered them think P.A.U.S Price variances uses Actual Usage variances use Standard i.e material price variance (standard price-actual price) x actual quantity material usage variance (standard quantity - actual quantity) x standard price same goes for labour variances Labour rate variance (standard rate - actual rate) x actual hrs labour usage variance (standard hrs - actual hrs) x standard rate thats more or less how ive remembered them HOWEVER - im still struggling with the fixed production overheads!! help!!

System · June 2003

Variance Analysis

With thanks to a posting I found some time ago on the Old Forum and a bit of my mad mind, this is how I remember Fixed Overhead Variances. Just remember EEC and SHEEPCAR. Sounds stupid I know, but read on. EEC = Expenditure, Efficiency and Capacity Sheepcar = BASAAB where B is Budgeted, A is Actual and S is Standard. So E (expenditure) = BA (Budgeted o/hs - Actual o/hs) E (efficiency) = SA ((Standard hrs - Actual hrs) x OAR) C (capacity) = AB ((Actual hrs - Budgeted hrs) x OAR) Have I lost you yet? You are left with Volume, which is (Efficiency + Capacity). I think of it as the only combination not used, which is SB ((Standard hrs - Budgeted hrs) x OAR) Oh and not forgetting Total Fixed o/h variance, well this one I just memorised. (Absorbed o/hs - Incurred o/hs). This is Expenditure + Volume. Always cross check as it helps spot any errors you may have made. Good luck and hope this helps. I just hope I remember them myself. Jasper

System · June 2003

Variance Analysis

To Jasper, I'm so glad I came onto this site tonight. i have been trying to memorise the overhead variance analysis all day..material and labout have now sunk in.. I think your method of memorising is excellent and I have written it down and will put it to practice over the next few days...took me a while to figure out what sheep car had to do with it (typical female) then relaised BA(sheep) SAAB (car) duh!! Thanks to you and hopefully this will do me well on the exams next week....now all I need is to master a mothod in "Incomplete records" nightmare!!!

System · June 2003

Variance Analysis - Evey

Hi Evey Glad I have been of help to at least one person. By the way I'm female too so the blokes will probably be surprised that I even know that SAAB is a car, or maybe even impressed! Anyway, thought sheepcar was a daft way of remembering it and I think you will agree that it sticks. Good luck too in your exams, I'm not too bad on Incomplete records (I think), which bit are you struggling with? Maybe I can help. Jasper

Variance Analysis

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