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