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Define variance types and their components.
a.) Material cost variance : It is the difference between the actual material cost and standard material cost. It is further divided into:
- Material Price Variance is the difference between standard price specified and actual price paid. Its components are:
a.) Actual Quantity
b.) Actual Price
c.) Standard Price
- Material Usage Variance is the difference between standard quantity specified and actual quantity used. Its components are:
a.) Standard Price
b.) Actual Quantity
c.) Standard Quantity
b.) Labour cost variances is the difference between standard wages specified and actual wages paid. It is further divided into:
- Wage Rate Variance: is the difference between standard pay of wages specified and actual wages paid. Its components are:
a.) Actual Hours
b.) Actual Rate
c.) Standard Rate
- Labour Efficiency Time Variance is the difference between standard labour hours specified and actual labour hours. Its components are:
a.) Standard Rate
b.) Actual Hours
c.) Standard Hours
c.) Overhead cost variance is the difference between standard overheads cost absorbed and actual overheads cost incurred. It is further divided into:
- Overheads Cost Variance - Its components are:
a.) Standard Hours for Actual Production
b.) Standard Hourly Rate
c.) Actual Overheads
- Expenditure Variance - Its components are:
a.) Revised Budgeted Overheads for Actual Hours
b.) Actual Overheads
- Efficiency Variance - Its components are:
a.) Standard Hourly Rate
b.) Standard Hours for Actual Production
c.) Actual Overheads
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