Direct Material Variances
Direct Labour Variances 
Mix Variance


One need to understand:

the  Budget and  Variances.

Variances: Comparison between Actual and Budget

What is mean by  Management by Exception? ( reporting variances to upper level management and finding out the reasons)

Favorable Variance 

Revenue (BR<AR) : Favorable
If your revenue is positive then it is favorable 
Cost ( BC>AC): Favorable 
If you  are compare cost then result is negative, it is favorable

Unfavorable Variance 

Revenue (BR>AR) : unfavorable
If your revenue is negative then it is unfavorable 

Cost ( BC<AC): unfavorable 

If you  are compare cost then result is positive, it is unfavorable

@pelx



Understanding Variable Cost and Fixed Cost 

Variable Cost increasing with production and Variable cost unit remain same at level; however in the fixed cost there is no relation between production with F.C.U changes at different level ( production is vice versa with FCU)


Level of Variances level -1

Static Budget Variance/ Set budget

1.   ( This Variance is a comparison of Actual with static Budget which is fixed in nature and prepared at the start of the period. :Actual- Static Budget)

 

Flexible Budget Variance

**Carry the standard at an actual levels

**Actual –Flexible budget (flexible Units* Standard Rate per unit)

 

Sales Volume Variance

*Flexible- Static Budget

Note: Common motive to compare the profit,

 

Level of Variance Level-2 (cost Variances)

Direct Material

Direct Labour

Manufacturing Overhead (Variable and Fixed)


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https://www.youtube.com/watch?v=foAqFEfvUSQ