variance analysis

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Variance analysis – meaning

Variance analysis is the process of computing the amount of and isolating the cause of variance between actual cost or revenue and standard cost and revenue.



Variance analysis involves the computation of individual variance and determination of causes of each variance.  

The purpose of variance analysis is to enable management to improve operations, increase … Read the rest

7 limitations of standard costing

7 limitations of standard costing.

Standard costing is a managerial control technique that facilitates a comparison of standard cost and revenue with actual results to obtain variance that is used to stimulate improved performance.  

The following are limitation of standard costing:

  • The standard costing system assumes that performance to standard is acceptable. Today’s business environment is more focused on continuous improvement
  • Standard costing was
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Variable overhead variance – meaning, causes and formula.

Variable overhead variance: Variable overheads vary directly with the volume of output and hence, the standard variable overheads very directly with the volume of output and hence, the standard variable overhead rate remains uniform. Therefore, computation of variable overhead variance, also known as variable overhead cost variance parallels the material and labour cost variances.



Thus, … Read the rest

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Standard costing and variance analysis revision question (NBAA, B5,NOV 2018)

Rorya Cakes Bakery makes a single product called Delicious Cakes. The company is using marginal costing to value its product. The company standard cost card for Delicious Cakes comes from the parent company called Rorya Oven headquartered in Malaysia, which contains the following:

Direct Material:                                                                                        TZS

Ingredient A:                            (2 kg @ TZS.1,500)                        3,000

Ingredient B:                            (1.5 litres @ TZS.1,200)               … Read the rest

feautures of job costing

Idle Time Variance – meaning and formula.

Idle Time Variance – This variance is the standard cost of actual time paid to workers for which they have not worked due to abnormal reasons. The Reasons for idle time may be power failure, defect in machinery, and non supply of materials, etc. Idle time variance should be segregated from the labour efficiency variance otherwise it will show inefficiency … Read the rest

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Variance analysis – meaning

Variance analysis is the process of computing the amount of and isolating the cause of variance between actual cost or revenue and standard cost and revenue.

Variance analysis involves the computation of individual variance and determination of causes of each variance

The purpose of variance analysis is to enable management to improve operations, increase efficiency, utilize resources more effectively and … Read the rest

Labour Rate of Pay or Wage Rate Variance – meaning and formula.

Labour Rate of Pay or Wage Rate Variance – It is that part of labour cost variance which arises due to a change in specified wage rate. Labour rate variance arises due to

  • change in basic wage rate or piece-work rate,
  • employing persons of different grades then specified,
  • payment of more overtime than fixed earlier, (iv) new workers being paid
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