Monday, February 22, 2010

Reasons for variances

Reasons for variances
Material price
  • (F) – unforseen discounts received, greater care taken in purchasing, change in material standard
  • (A)– price increase, careless purchasing, change in material standard.
Material usage
  • (F) – material used of higher quality than standard, more effective use made of material
  • (A) – defective material, excessive waste, theft, stricter quality control
Labour rate
  • (F) – use of workers at rate of pay lower than standard
  • (A) – wage rate increase
Idle time
  • Machine breakdown, non-availability of material, illness
Labour efficiency
  • (F) – output produced more quickly than expected because of work motivation, better quality of equipment or materials
  • (A) – lost time in excess of standard allowed, output lower than standard set because of deliberate restriction, lack of training, sub-standard material used.
Overhead expenditure
  • (F) – savings in cost incurred, more economical use of services.
  • (A) – increase in cost of services used, excessive use of services, change in type of services used
Overhead volume
  • (F) – production greater than budgeted
  • (A) – production less than budgeted

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