Management Accounting (MA) Standard Costing and Variance Analysis Flashcards
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Read the first 7 Management Accounting (MA) Standard Costing and Variance Analysis flashcards as text
The fixed overhead expenditure variance compares:
Answer: Budgeted fixed overheads with actual fixed overheads
Fixed overhead expenditure variance = Budgeted fixed overheads – Actual fixed overheads, showing whether spending on fixed costs was more or less than planned.
A company budgets to produce 1,000 units with fixed overheads of £5,000. Actual production is 900 units and actual fixed overheads are £5,000. What is the fixed overhead volume variance?
Answer: £500 adverse
Volume variance = (Actual production – Budgeted production) × Standard rate = (900 – 1,000) × £5 = £500 adverse, as fixed overheads are under-absorbed.
The fixed overhead capacity variance measures:
Answer: The difference between actual hours worked and budgeted hours, valued at the standard rate
Capacity variance = (Actual hours worked – Budgeted hours) × Standard fixed overhead rate per hour, reflecting whether the workforce was active for more or fewer hours than budgeted.
The variable overhead efficiency variance is most similar in structure to:
Answer: The direct labour efficiency variance
Both the variable overhead efficiency variance and the labour efficiency variance are driven by the difference between standard and actual hours, valued at the respective standard rate per hour.
A company has a standard selling price of £40 per unit. Actual sales were 500 units at £38 per unit. What is the sales price variance?
Answer: £1,000 adverse
Sales price variance = (Standard price – Actual price) × Actual units sold = (£40 – £38) × 500 = £1,000 adverse.
Under marginal costing, the sales volume variance is valued using:
Answer: Standard contribution per unit
Under marginal costing, sales volume variance = (Actual volume – Budgeted volume) × Standard contribution per unit, since fixed costs are treated as period costs.
Which of the following would cause a favourable direct material price variance?
Answer: Buying material at a lower price than the standard price
A favourable material price variance arises when the actual price paid per unit of material is less than the standard price.