Practice flexible budgeting, standard costing, and variance analysis including materials, labour, and overhead variances. Free questions with detailed explanations.
Start practising now — it's free Read study guidesVariance analysis compares actual results to budgeted amounts to identify where performance diverged and why. It is the core management control tool — separating whether cost overruns are due to paying too much for inputs (price variances) or using more inputs than planned (efficiency variances).
Materials variances: price variance = (AP − SP) × AQ purchased; quantity variance = (AQ used − SQ allowed) × SP. Labour variances: rate variance = (AR − SR) × AH worked; efficiency variance = (AH worked − SH allowed) × SR. Overhead variances add spending, efficiency, and volume components. Favourable variances mean actual was better than standard; unfavourable means worse.
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