MATERIAL COST VARIANCE FORMULA

 Standard Cost – Actual Cost

In other words, (Standard Quantity for actual output x Standard Price) – (Actual Quantity
x Actual Price)

Material Variance is further sub-divided into two heads:

MATERIAL PRICE VARIANCE

MPV = (Standard Price – Actual Price) x Actual Quantity

MATERIAL USAGE VARIANCE

 MUV = (Standard Quantity for actual output – Actual Quantity) x Standard Price
 
LABOR VARIANCE FORMULA
Standard Wages – Actual Wages

In other words,
(Standard Hours for actual output x Standard Rate Per Hour) – (Actual Hours x Actual
Rate Per Hour)

Labor Variance is further sub-divided into two heads:

LABOR RATE VARIANCE

LRV = (Standard Rate Per Hour – Actual Rate Per Hour) x Actual Hours

LABOR EFFICIENCY VARIANCE

 LEV = (Standard Hours for Actual Out Put – Actual Hours) x Standard Rate

VARIABLE OVERHEAD VARIANCE

Variable Overhead Variance arises when there is a difference between the actual
variable overhead and the standard variable overhead based on budgets.

VARIABLE OVERHEAD VARIANCE FORMULA

 Standard Variable Overhead – Actual Variable Overhead
In other words, (Standard Rate – Actual Rate) x Actual Output

 Variable Overhead Variance is further sub-divided into two heads:

VARIABLE OVERHEAD EFFICIENCY VARIANCE
VOEV = (Actual Output – Standard Output) x Standard Rate

VARIABLE OVERHEAD EXPENDITURE VARIANCE

VOEV = (Standard Output x Standard Rate) – (Actual Output x Actual Rate)
 FIXED OVERHEAD VARIANCE 
1. It arises when there is a difference between the standard fixed overhead for
actual output and the actual fixed overhead.
FIXED OVERHEAD VARIANCE FORMULA
= (Actual Output x Standard Rate per unit) – Actual Fixed Overhead

Fixed Overhead Variance is further sub-divided into two heads:

FIXED OVERHEAD EXPENDITURE VARIANCE

FOEV = Standard Fixed Overhead – Actual Fixed Overhead

FIXED OVERHEAD VOLUME VARIANCE

  FOVV = (Actual Output x Standard Rate per unit) – Standard Fixed Overhead

SALES VARIANCE 
Sales Variance is the difference between the actual sales and budgeted sales of an
organization.

SALES VARIANCE FORMULA

= (Budgeted Quantity x Budgeted Price) – (Actual Quantity x Actual Price)

Sales Variance is further sub-divided into two heads:

SALES VOLUME VARIANCE

SVV = (Budgeted Quantity – Actual Quantity) x Budgeted Price

SALES PRICE VARIANCE

SPV = (Budgeted Price – Actual Price) x Actual Quantity

Standard Costing and Variance Analysis Formulas:

This is a collection of variance formulas/equations which can help you calculate
variances for direct materials, direct labor, and factory overhead.

1. Direct materials variances formulas

2. Direct labor variances formulas
3. Factory overhead variances formulas

Direct Materials Variances:

Materials purchase price variance Formula:
Materials purchase price variance = (Actual quantity purchased × Actual price) – (Actual
quantity purchased × Standard price)

Materials price usage variance formula:

Materials price usage variance = (Actual quantity used × Actual price) – (Actual quantity
used × Standard price)

materials quantity/usage variance formula:

Materials price usage variance = (Actual quantity used × Standard price) – (Standard
quantity allowed × Standard price)

Materials mix variance formula:

(Actual quantities at individual standard materials costs) –  (Actual quantities at weighted
average of standard materials costs)

Materials yield variance formula:

(Actual quantities at weighted average of standard materials costs) –  (Actual output
quantity at standard materials cost)

Direct Labor Variances:

Direct labor rate/price variance formula:
(Actual hours worked × Actual rate) – (Actual hours worked × Standard rate)

Direct labor efficiency/usage/quantity formula:

(Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate)

Direct labor yield variance formula:

(Standard hours allowed for expected output × Standard labor rate) – (Standard hours
allowed for actual output × Standard labor rate)

Factory Overhead Variances:

Factory overhead controllable variance formula:
(Actual factory overhead) – (Budgeted allowance based on standard hours allowed*)

Factory overhead volume variance:

(Budgeted allowance based on standard hours allowed*) – (Factory overhead applied or
charged to production**)

Factory overhead spending variance:

(Actual factory overhead) – (Budgeted allowance based on actual hours worked***)

Factory overhead idle capacity variance formula:

(Budgeted allowance based on actual hours worked***) – (Actual hours worked × Standard
overhead rate)
Factory overhead efficiency variance formula:
(Actual hours worked × Standard overhead rate) – (Standard hours allowed for expected
output × Standard overhead rate)

Variable overhead efficiency variance formula:

(Actual hours worked × Standard variable overhead rate) – (Standard hours allowed ×
Standard variable overhead rate)

Variable overhead efficiency variance formula:

(Actual hours worked × Fixed overhead rate) – (Standard hours allowed × Fixed overhead
rate)

Factory overhead yield variance formula:

(Standard hours allowed for expected output × Standard overhead rate) – (Standard hours
allowed for actual output × Standard overhead rate)

Company XYZ produces a product that has the following factory overhead standard costs
per unit. The budgeted production is at the normal capacity of 1,000 units, requiring a
budgeted time of 3,000 hours. The total fixed factory overhead at this capacity is $30,000.
Variable FOH 3 hours at $30 per hour
Fixed FOH 3 hours at $10 per hour

During the month, the company produced 1,100 units and incurred the following actual
factory overhead costs:
Variable FOH 3,250 hours at $29 per hour $  94,250
Fixed FOH   $  36,500
Total   $130,750

The two-way analysis variances can be computed as follows:

BUDGET VARIANCE
  Actual FOH $130,750 
  Budget allowed on standard hours 129,000 
     *for variable (1,100 x 3 hours x $30)    
     *for fixed ($30,000 as budgeted)    
  Budget variance $   1,750 UF
       
VOLUME VARIANCE    
  Budget allowed on standard hours $129,000 
  Standard FOH (1,100 x 3 hours x $40) 132,000 
  Volume variance $   3,000 F
       
TOTAL FACTORY OVERHEAD VARIANCE $   1,250 F
Company XYZ produces a product that has the following factory overhead standard costs
per unit. The budgeted production is at the normal capacity of 1,000 units, requiring a
budgeted time of 3,000 hours. The total fixed factory overhead at this capacity is $30,000.
Variable FOH 3 hours at $30 per hour
Fixed FOH 3 hours at $10 per hour

During the month, the company produced 1,100 units and incurred the following actual
factory overhead costs:
Variable FOH 3,250 hours at $29 per hour $  94,250
Fixed FOH   $  36,500
Total   $130,750

The three-way analysis variances can be computed as follows:

SPENDING VARIANCE
  Actual FOH (variable + fixed) $130,750 
  Budget allowed on actual hours (BAAH) 127,500 
     *for variable (3,250 hours x $30)    
     *for fixed ($30,000 as budgeted)    
  Budget variance $   3,250 UF
       
EFFICIENCY VARIANCE  
  Budget allowed on actual hours (BAAH) $127,500 
  Budget allowed on standard hours (BASH) 129,000 
     *for variable (1,100 x 3hours x $30)    
     *for fixed ($30,000 as budgeted)    
  Efficiency variance $   1,500 F
       
VOLUME VARIANCE    
  Budget allowed on standard hours (BASH) $129,000 
  Standard FOH (1,100 x 3 hours x $40) 132,000 
  Volume variance $   3,000 F
       
TOTAL FACTORY OVERHEAD VARIANCE $   1,250 F
Four-Way Analysis
A more expanded breakdown known as "four-way analysis" simply separates the spending
variance into the variable and fixed components. The four-way analysis consists of: 1.)
variable spending variance, 2.) fixed spending variance, 3.) efficiency variance, and 4.)
volume variance.