ECONOMICS

Detailed explanation-1: -Actual output at standard hours. When performing input-output variance analysis in standard costing, “standard hours allowed” is a means of measuring: Number of actual hours worked in excess of the standard hours allowed multiplied by the standard labor rate.

Detailed explanation-2: -Variance analysis involves the measurement of the deviation of actual performance form the intended performances. Also known as negative or debit variance. It is the difference between the standard cost of direct materials specified for the output achieved and the actual cost of direct materials used.

Detailed explanation-3: -The most simple form of cost variance analysis is to subtract the budgeted or standard cost from the actual incurred cost, and reporting on the reasons for the difference. A more refined approach is to split this difference into two elements, which are: Price variance.

Detailed explanation-4: -Material Cost Variance Formula = Standard Cost – Actual Cost = (SQ * SP) – (AQ * AP) Labor Variance Formula= Standard Wages – Actual Wages = (SH * SP) – (AH * AP)

Detailed explanation-5: -Labor rate variance is calculated to determine the difference between the actual rate and standard rate, which is multiplied by the actual hours. It is a favorable variance when actual rate is less than the standard rate.