# VARIANCE ANALYSIS NOTES

Direct material cost variance:
1) Material cost variance = (actual price x actual quantity) – (standard price x standard quantity)
2) Material price variance = (actual price – standard price) actual quantity
3) Material usage variance = (actual quantity – standard quantity) x standard price

Direct labour cost variance:
1) Labour cost variance =(actual hours x actual rate) – (standard hours x standard rate)
2) Labour rate variance = (actual rate – standard rate) x actual hours
3) Labour efficiency variance = (actual hours – standard hours) x standard rate

Variable overhead cost variance:
1) Variable overhead variance = (standard variable overhead – actual variable overhead)
2) Variable overhead expenditure variance = (actual production x standard variable OH rate) – actual variable OH
3) Variable OH efficiency variance = ( standard production x standard rate) – actual variable OH

Fixed overhead cost variance:
1) Fixed OH expenditure variance = (actual fixed OH – budgeted fixed OH)
2) Fixed OH volume variance = (budgeted fixed OH – Standard fixed OH)
3) Fixed OH capacity variance = (budgeted fixed OH – Absorbed fixed OH)
4) Fixed OH efficiency variance = (Absorbed fixed OH – Standard fixed OH)

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