I'm using Yaeger, and Cindy presents a matrix that you can use to solve the variance questions.
Here's what it looks like:
AQ x AP = ___________
(used or purchased)
Difference between these two numbers
represents the DM Purchase Price Variance,
DM Price Variance, or DL Rate Variance
AQ x SP = ____________
(used or purchased)
Difference between these two numbers
represents the DM Quantity/Usage variance, or
the DL Efficiency/Usage Variance
SQ x SP = ____________
(allowed – based on units produced)
So, I have memorized this matrix, and when I get a problem, I write out the matrix and start plugging numbers where they go.
Example:
Yola Co. manufactures one product with a standard direct manufacturing labor cost of four hours at $12 per hour. During June, 1000 units were produced using 4,100 hours at $12.20 per hour. What is the direct labor efficiency variance?
Solution:
Since it's asking for a DL EFFICIENCY variance (as opposed to a price variance), I know that it will involve the two lower levels in the matrix. For AQ (actual quantity), you would plug in 4,100 hours (this is given as the actual number of labor hours used). For standard price, plug in $12 (given). To figure SQ (standard quantity), you would multiply the 1000 units produced by four hours (four hours being the standard amount of time it takes to produce one unit – given), to get standard direct labor hours allowed of 4,000.
Filling out the two lower levels of the matrix, here's what you get:
AQ x SP
4,100 hours $12 = $49,200
Difference b/w these two numbers is $1,200, and the
variance is unfavorable since the actual quantity of DL
hours used is more than the standard qty allowed.
SQ SP
4,000 hours x $12 = $48,000
Note that the actual labor price per hour of $12.20 is not even needed. If they had asked for the DL price variance, now you would use the top two levels of the matrix.
This matrix seems to work for me every time. Like you said, though, you need to know where to plug the numbers. Just remember that if the question asks for an efficiency variance, it is asking whether they used more or less than the standard number of labor hours or direct materials that they were supposed to use based on actual production, and this would mean you use the two lower levels.
I hope I haven't confused you even more!
REG 11/28/11 - 88
BEC 04/04/12 - 88
FAR 07/23/12 - 90
AUD 11/2012 - 92
Yaeger/Wiley
.