Costing

Standard Cost Normal Cost Actual Cost

Direct Materials Standard Actual Actual
Direct Labor Standard Actual Actual
Overhead Standard Budgeted Actual

Budgeted
= Budgeted Sales + Ending inventory – Beginning inventory
Production
(in units) (in units) (in units)
(in units)

Standard quantity of
= (Unit quantity standard)(Actual output)
materials allowed (SQ)

Standard quantity
= (Unit labor standard)(Actual output)
hours allowed (SH)

= Actual Cost – Planned Cost

Total Budget Variance
(AP x AQ) – (SP x SQ)

Unfavorable variance: occurs when AP or AQ > SP or SQ

Favorable variance: occurs when AP or AQ < SP or SQ

Price Variance
=(AP x AQ) – (SP x AQ)
=(AP – SP) x AQ

Total Budget Variance

=(AP x AQ) – (SP x SQ)

Usage Variance
=(SP x AQ) – (SP x SQ)
=(AQ – SQ) x SP

AP = Actual Price AQ = Actual Quantity

SP = Standard Price SQ = Standard Quantity
Total labor variance = Labor rate variance + Labor Efficiency Variance

Price Variance
=(AR x AH) – (SR x AH)
=(AR – SR) x AH

Total Labor Variance

=(AR x AH) – (SR x SH)

Usage Variance
=(SR x AH) – (SR x SH)
=(AH – SH) x SR

AR = Actual Rate AH = Actual Hours

SR = Standard Rate SH = Standard Hours

Flexible Budgeting

Actual Variable Overhead = Actual VOH

(VOH) Rate Actual Hours

VOH Spending Variance

=(AVOR x AH) – (SVOR x AH)
=(AVOR – SVOR) x AH

Total Variable Overhead

(VOH) Variance
=(AVOR x AH) – (SVOR x SH)

VOH Efficiency Variance

=(SVOR x AH) – (SVOR x SH)
=(AH – SH) x SVOR
Standard Fixed Overhead = Budgeted FOH costs
(FOH) Rate Practical Capacity

FOH Spending Variance

=Actual FOH – Budgeted FOH
(AFOH) (BFOH)

Total Fixed Overhead

Variance
=Actual FOH – Applied FOH

FOH Volume Variance

=Budgeted FOH–Applied FOH
(BFOH) (SH x SFOR)