Variances

Studying. Having problems remembering formulae. Must make notes now.

Price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price) = Actual quantity * (Actual price - Standard price)

Mix variance = (Actual quantity * Standard price) - (Actual quantity at standard mix * Standard price) = Standard price * (Actual quantity - Actual quantity at standard mix)

Yield variance = (Actual quantity at standard mix * Standard price) - (Standard quantity at standard mix - Standard price) = Standard price * (Actual quantity at standard mix - Standard quantity at standard mix)

Actual quantity at standard mix = Budgeted percent of materials to mix * Total input of all mix materials

Standard quantity at standard mix = Budgeted percent of materials to mix * Standard input of all mix materials

Budgeted percent of materials to mix = Budgeted specific material quantity / Budgeted total material quantity

Efficiency variance = (Actual quantity * Standard price) - (Standard quantity * Standard price) = Standard price * (Actual quantity - Standard quantity) = Mix variance + Yield variance

Important Note: In cost related variance analysis, positive numbers are unfavorable and negative numbers are favorable. In revenue related variance analysis, the reverse is true.

Sometimes, the prerequisite courses just teach you the formulae, and the subsequent course explains it further and shows you how to apply it. MA2 should be more detailed, I assume. MA1 is all math.