Danny787 – I definitely cannot take credit for this, this was posted by another member, financeguy, but his post really helped me to understand variances better than the way Becker taught it. If I knew how to sync it up, I would – hopefully financeguy doesn't mind my sharing it!
(financeguy)
“I see quite a few posts of people having problems w/ variances, so I thought I would post this as I don't think I have seen it on here before. This is how I learned it in college and makes much more sense to me then the way they show it in my review course.
AQxAP<
>AQxSP<
>SQxSP
The left side is the price variance, the right side is the usage variance, and the entire thing is the total variance. So what you do is set up algebraic equations:
for price variance = AQ(AP – SP)
materials/usage variance = SP(AQ – SQ)
Then you just plug in the numbers that you are given and perform the equation. I simply memorized that AQ is on the far left and SP on the far right. I have always liked algebra and been really good at it, so this worked very well for me. For me, this makes variances a piece of cake. Not sure if I explained it well enough, but maybe it will help someone out. “
Hope this helps! 🙂
“
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