GET LISTED | LOGIN | SIGNUP
 
Welcome to FindMyBest CPA
 
Accounting & Financial Directory
 
Find local and nationwide accounting and financial businesses. We have located the best Accountants, CPAs, Accounting Firms, Tax Consultants, Tax Return Preparers, Bookkeepers and Financial Advisors in the US.
 
Business Directory
 
Tax & Accounting Articles - Cost Accounting
 
 
 
CPA's Find New Clients Today
 
FindMyBestCPA Search
User Details
Reviews and Comments
 
Search top city
Atlanta Accountants
------------------------------------------------------
Boston Accountants
------------------------------------------------------
Chicago Accountants
------------------------------------------------------
Dallas Accountants
------------------------------------------------------
Detroit Accountants
------------------------------------------------------
Huston Accountants
------------------------------------------------------
Los Angeles Accountants
------------------------------------------------------
Miami Accountants
------------------------------------------------------
New York Accountants
------------------------------------------------------
Philadelphia Accountants
------------------------------------------------------
San Francisco Accountants
------------------------------------------------------
Washington Accountants
 
List of General Articles
 
Fortune 500 Company List
 
Public Accounting
Accounting and Terminology
Accounting Tools
IRS Tax Forms
Other Taxes
Governing Bodies and Regulations
Income Taxes
Other Types of Accounting
CPA Guide
Cost Accounting
 
Tax & Accounting Sub Category Articles
CPA's Find New Clients For Your Firm
Accounting Information > Cost Accounting > Variances
Variances

A variance is the difference between an actual cost and the standard or budgeted cost, or between actual and budgeted revenue. When actual cost is greater than the standard cost, an unfavorable variance exists. If actual cost is less than the standard cost, there is a favorable variance. All variances should be evaluated, and appropriate action should be taken to eliminate unfavorable variances to the extent possible in the future.

 

Variance analysis looks at two important factors. The first is the difference between actual and standard costs. The second factor is the reason that the difference occurred. It can be difficult to determine the reasons behind the variances. Once the reasons are found, a plan of action must be put in place to avoid the same problem in the future.

Companies figure variances for the three basic cost elements of manufacturing: direct labor, direct materials, and manufacturing overhead. There are two types of direct material variances. These are material price variances and material quantity variances. The material price variance is the difference between the actual cost of material and the standard cost anticipated to be paid for the material. The material quantity variance is the difference between the actual quantity of material used and the standard quantity that was expected to be used to make the product. This variance is sometimes called the material use variance.

There are two types of direct labor variances. They are the labor rate variance and the labor efficiency variance. The labor rate variance is the difference between the actual hours worked multiplied by the standard rate, and the actual hours worked multiplied by the actual rate. When workers are paid at higher than the standard rate, an unfavorable variance exists, and vice versa. The labor efficiency variance is the difference between the standard hours multiplied by the standard rate, and the actual hours worked multiplied by the standard rate. When the actual hours worked are less than the standard hours, a favorable variance exists.

Manufacturing overhead variances are more complicated to analyze than the direct labor and direct materials variances. The reason for this is that overhead costs are indirect costs that include both fixed and variable components. The variance for total overhead is the difference between the value of overhead applied to production for the period and the actual overhead cost incurred throughout the period. There are various methods of analyzing manufacturing overhead variances, including the two-variance method and the three-variance method. Under the two-variance method, the total overhead variance is broken down into a controllable variance and a volume variance. Under the three-variance method, the controllable variance is further broken down into a spending variance and an overhead efficiency variance.

If you are looking for a CPA or Accounting Firm to assist you with your cost accounting, general accounting, income tax reporting, bookkeeping, or financial planning needs, then you have come to the right place! Use the CPA Search feature on this website to find a qualified professional in your area to meet your needs.

 
 
 
 
 
 
© Copyrights 2007, All Rights Reserved. FindMyBestCPA.com
Home     AboutUs     CPA Directory     List Your Firm     Links     Privacy     Contact Us