[Givemesleep]

Can anyone in simple terms tell me what it is we are trying to solve with these problems and what a good first step is when seeing a variance question? To save time, yes I have wathed the Roger Youtube video, SEVen etc., I can memorize, but just haven’t had that aha moment yet. Just need a little guidance, I will crack the rest myself with practice. Many thanks

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Yvonne570]

Oh yes, this is something that can be simplified.

Volume variance = if volume usage is higher than forecast, the difference would be unfavorable. Even if the overall cost is lower. Computed as difference between standard and actual units x (standard cost) = favorable/unfavorable volume variance.

Cost variance: if per unit cost is higher than standard, then price variance is unfavorable regardless of volume. Computed as difference between standard and actual cost x (actual units) = favorable/unfavorable price (cost) variance

Conceptually, a higher actual than standard when it comes to costs is unfavorable; however, if you use this concept for sales, then it's the opposite. I have a very useful link for you if you like.

business.illinois.edu/doogar/302/Supp/Day11sol.ppt

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[Justinnnn]

For Overhead Variances

Spending Variance – The difference between actual overhead incurred (actual cost X actual input at actual achieved output) and standard cost X actual input

Efficiency Variance- the difference between actual input (ie. direct labor hours) achieved X standard cost and standard input for “actual” (achieved) output X standard cost. (Fixed M OH is the total budgeted for the project, which is the same in both of these)

“Flexible budget variance” (controllable) – the difference between actual overhead incurred and standard input for “actual” (achieved) output X standard cost. This is the sum of the above two variances, FYI.

“Volume variance” (uncontrollable) – difference between 1. standard inputs at achieved output X standard cost, with fixed overhead budgeted as a total amount regardless of achieved output; and 2. overhead applied. Overhead applied is a standard rate or both variable and fixed overhead costs X budgeted inputs (for achieved output, this is beginning to sound redundant now:))

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[Givemesleep]

Yvonne and Justin – wow thanks

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Yvonne570]

No problem. The attachment is a ppt file that will explain it so much more clearly than words can type. It's what helped me.

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[Justinnnn]

https://worldacademyonline.com/article/26/378/fixed_overhead_variances.html

This would be a good aid for overhead variances.

Now the materials and labor variances are simpler than overhead so I won't bother since I am sure the review materials prepared you. (it really goes as far as difference in units X standard rate or difference in rates X actual units)

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[Givemesleep]

Very nice my friends

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Justinnnn]

One more thing

Actual Overhead Incurred is a “Debit” and Overhead Applied is a “Credit.” A few MCQs make you compare them and answer “overapplied/underapplied” and “Debit/Credit”

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[Author]

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