Standard Costs and The Balanced Scorecard: Chapter Ten

Standard Costs and the
Balanced Scorecard
Chapter Ten
McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

10-2
Standard Costs
Standards are benchmarks or “norms”

for measuring performance. Two types
of standards are commonly used.
Quantity standards Cost (price)

specify how much of an standards specify
input should be used to how much should be
make a product or paid for each unit
provide a service. of the input.

10-3
Standard Costs
Deviations from standards deemed significant

are brought to the attention of management, a
practice known as management by exception.
Standard
Amount
Direct
Material
Direct Manufacturing
Labor Overhead
Type of Product Cost

10-4 Exhibit
10-1
Variance Analysis Cycle
Take
Identify Receive corrective
questions explanations actions
Conduct next
Analyze period’s
variances operations
Prepare standard
Begin
cost performance
report

10-5
Setting Standard Costs
Accountants, engineers, purchasing

agents, and production managers
combine efforts to set standards that encourage
efficient future production.

10-6
Setting Standard Costs
Should we use I recommend using practical

ideal standards that standards that are currently
require employees to attainable with reasonable and
work at 100 percent efficient effort.
peak efficiency?
Engineer Managerial
Accountant
10-7
Learning Objective 1
Explain how direct

materials standards
and direct labor
standards are set.

10-8
Setting Direct Material Standards
Price Quantity
Standards Standards
Final, delivered Summarized in

cost of materials, a Bill of Materials.
net of discounts.

10-9
Setting Standards
Six Sigma advocates have sought to

eliminate all defects and waste, rather than
continually build them into standards.
As a result allowances for waste and

spoilage that are built into standards
should be reduced over time.

10-10
Setting Direct Labor Standards
Rate Time
Standards Standards
Often a single Use time and

rate is used that reflects motion studies for
the mix of wages earned. each labor operation.

10-11
Setting Variable Overhead Standards
Rate Activity
Standards Standards
The rate is the The activity is the

variable portion of the base used to calculate
predetermined overhead the predetermined
rate. overhead.

10-12
Standard Cost Card – Variable
Production Cost
A standard cost card for one unit of

product might look like this:
A B AxB
Standard Standard Standard
Quantity Price Cost
Inputs or Hours or Rate per Unit
Direct materials 3.0 lbs. $ 4.00 per lb. $ 12.00
Direct labor 2.5 hours 14.00 per hour 35.00
Variable mfg. overhead 2.5 hours 3.00 per hour 7.50
Total standard unit cost $ 54.50

10-13
Standards vs. Budgets
Are standards the A standard is a per

same as budgets? unit cost.
A budget is set for Standards are often
used when
total costs. preparing budgets.

10-14
Price and Quantity Standards
Price and and quantity standards are

determined separately for two reasons:
 The purchasing manager is responsible for raw

material purchase prices and the production manager
is responsible for the quantity of raw material used.
 The buying and using activities occur at different times.

Raw material purchases may be held in inventory for a
period of time before being used in production.
10-15
A General Model for Variance Analysis
Variance Analysis
Price Variance Quantity Variance
Difference between Difference between

actual price and actual quantity and
standard price standard quantity

10-16
Variance Analysis
Materials price variance Materials quantity variance

Labor rate variance Labor efficiency variance
VOH spending variance VOH efficiency variance

10-17
Actual Quantity Actual Quantity Standard Quantity

× × ×
Actual Price Standard Price Standard Price

10-18

× × ×
Actual quantity is the amount of direct

materials, direct labor, and variable
manufacturing overhead actually used.

10-19

× × ×
Standard quantity is the standard quantity

allowed for the actual output of the period.

10-20

× × ×
Actual price is the amount actually

paid for the input used.

10-21

× × ×
Standard price is the amount that should

have been paid for the input used.

10-22

× × ×
(AQ × AP) – (AQ × SP) (AQ × SP) – (SQ × SP)

AQ = Actual Quantity SP = Standard Price
AP = Actual Price SQ = Standard Quantity

10-23
Compute the direct

materials price and
quantity variances and
explain their significance.

10-24
Material Variances Example
Glacier Peak Outfitters has the following direct

material standard for the fiberfill in its mountain
parka.
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs of fiberfill were purchased

and used to make 2,000 parkas. The material
cost a total of $1,029.

10-25
Material Variances Summary

× × ×
210 kgs. 210 kgs. 200 kgs.
× × ×
$4.90 per kg. $5.00 per kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000
Price variance Quantity variance

$21 favorable $50 unfavorable

10-26

× × ×
210 kgs. 210 kgs. 200 kgs.
× $1,029  ×
210 kgs ×
$4.90 per kg. $5.00per
= $4.90 perkg
kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000


10-27

× × ×
210 kgs. 210 kgs. 200 kgs.
× 0.1 kg per parka× 2,000 parkas ×
$4.90 per kg. $5.00
= 200 per
kgs kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000


10-28
Material Variances:
Using the Factored Equations
Materials price variance

MPV = AQ (AP - SP)
= 210 kgs ($4.90/kg - $5.00/kg)
= 210 kgs (-$0.10/kg)
= $21 F
Materials quantity variance
MQV = SP (AQ - SQ)
= $5.00/kg (210 kgs-(0.1 kg/parka 2,000 parkas))
= $5.00/kg (210 kgs - 200 kgs)
= $5.00/kg (10 kgs)
= $50 U

10-29
Isolation of Material Variances
I’ll start computing

I need the price variance the price variance
sooner so that I can better
when material is
identify purchasing problems.
purchased rather than
You accountants just don’t when it’s used.
understand the problems that
purchasing managers have.

10-30
Material Variances
The price variance is

Hanson purchased and
computed on the entire
used 1,700 pounds.
quantity purchased.
How are the variances
computed if the amount The quantity variance
purchased differs from is computed only on
the amount used? the quantity used.

10-31
Responsibility for Material Variances
Materials Quantity Variance Materials Price Variance
Production Manager Purchasing Manager
The standard price is used to compute the quantity variance

so that the production manager is not held responsible for
the purchasing manager’s performance.
10-32
Responsibility for Material Variances
Your poor scheduling

I am not responsible for sometimes requires me to
this unfavorable material rush order material at a
quantity variance. higher price, causing
You purchased cheap unfavorable price variances.
material, so my people
had to use more of it.

10-33
Quick Check  Zippy
Hanson Inc. has the following direct material

standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 1,700 pounds of material were

purchased and used to make 1,000 Zippies.
The material cost a total of $6,630.

10-34
Hanson’s material price variance (MPV)

for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.

10-35
Hanson’s material price variance (MPV)

for the week was:
b. $170 favorable.
MPV = AQ(AP - SP)
d. $800 favorable.MPV = 1,700 lbs. × ($3.90 - 4.00)
MPV = $170 Favorable

10-36
Hanson’s material quantity variance (MQV)

for the week was:
b. $170 favorable.
d. $800 favorable.

10-37
Hanson’s material quantity variance (MQV)

for the week was:
b. $170 favorable.
d. $800 favorable.
MQV = SP(AQ - SQ)
MQV = $4.00(1,700 lbs - 1,500 lbs)
MQV = $800 unfavorable
10-38

× × ×
1,700 lbs. 1,700 lbs. 1,500 lbs.
× × ×
$3.90 per lb. $4.00 per lb. $4.00 per lb.
= $6,630 = $ 6,800 = $6,000

10-39
Quick Check  Continued Zippy
Hanson Inc. has the following material standard

to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 2,800 pounds of material were

purchased at a total cost of $10,920, and 1,700
pounds were used to make 1,000 Zippies.

10-40
Actual Quantity Actual Quantity

Purchased Purchased
× ×
Actual Price Standard Price
2,800 lbs. 2,800 lbs.
× ×
$3.90 per lb. $4.00 per lb.
= $10,920 = $11,200
Price variance increases

Price variance because quantity
$280 favorable purchased increases.
10-41
Actual Quantity
Used Standard Quantity
× ×
Standard Price Standard Price
1,700 lbs. 1,500 lbs.
× ×
$4.00 per lb. $4.00 per lb.
= $6,800 = $6,000
Quantity variance is
unchanged because
actual and standard Quantity variance
quantities are unchanged. $800 unfavorable
10-42
Compute the direct labor

rate and efficiency
variances and explain
their significance.

10-43
Labor Variances Example

labor standard for its mountain parka.
1.2 standard hours per parka at $10.00 per hour
Last month, employees actually worked 2,500

hours at a total labor cost of $26,250 to make
2,000 parkas.

10-44
Labor Variances Summary
Actual Hours Actual Hours Standard Hours

× × ×
Actual Rate Standard Rate Standard Rate
2,500 hours 2,500 hours 2,400 hours
× × ×
$10.50 per hour $10.00 per hour. $10.00 per hour
= $26,250 = $25,000 = $24,000
Rate variance Efficiency variance

$1,250 unfavorable $1,000 unfavorable

10-45

× × ×
× $26,250×  2,500 hours ×
$10.50 per hour $10.00 per hour.
= $10.50 per hour $10.00 per hour
= $26,250 = $25,000 = $24,000


10-46

× × ×
× 1.2 hours per ×parka  2,000 ×
$10.50 per hour parkas
$10.00 per hour.
= 2,400 hours $10.00 per hour
= $26,250 = $25,000 = $24,000


10-47
Labor Variances:
Using the Factored Equations
Labor rate variance

LRV = AH (AR - SR)
= 2,500 hours ($10.50 per hour – $10.00 per hour)
= 2,500 hours ($0.50 per hour)
= $1,250 unfavorable
Labor efficiency variance
LEV = SR (AH - SH)
= $10.00 per hour (2,500 hours – 2,400 hours)
= $10.00 per hour (100 hours)
= $1,000 unfavorable

10-48
Responsibility for Labor Variances
Production managers are Mix of skill levels

usually held accountable assigned to work tasks.
for labor variances
because they can
Level of employee
influence the:
motivation.
Quality of production
supervision.
Quality of training
provided to employees.
Production Manager

10-49
Responsibility for
Labor Variances
I think it took more time

to process the
I am not responsible for materials because the
the unfavorable labor Maintenance
efficiency variance! Department has poorly
maintained your
You purchased cheap equipment.
material, so it took more
time to process it.

10-50
Hanson Inc. has the following direct labor

standard to manufacture one Zippy:
1.5 standard hours per Zippy at $12.00 per
direct labor hour
Last week, 1,550 direct labor hours were

worked at a total labor cost of $18,910
to make 1,000 Zippies.

10-51
Hanson’s labor rate variance (LRV) for

the week was:
b. $310 favorable.
d. $300 favorable.

10-52
Hanson’s labor rate variance (LRV) for

the week was:
b. $310 favorable.
LRV = AH(AR - SR)
LRV = 1,550 hrs($12.20 - $12.00)
d. $300 favorable.
LRV = $310 unfavorable

10-53
Hanson’s labor efficiency variance (LEV)

for the week was:
b. $590 favorable.
d. $600 favorable.

10-54
Hanson’s labor efficiency variance (LEV)

for the week was:
b. $590 favorable.
d. $600 favorable.
LEV = SR(AH - SH)
LEV = $12.00(1,550 hrs - 1,500 hrs)
LEV = $600 unfavorable
10-55

× × ×
× × ×
$12.20 per hour $12.00 per hour $12.00 per hour
= $18,910 = $18,600 = $18,000

$310 unfavorable $600 unfavorable
10-56
Compute the variable

manufacturing overhead
spending and efficiency
variances.

10-57
Variable Manufacturing Overhead
Variances Example

variable manufacturing overhead labor standard
for its mountain parka.
1.2 standard hours per parka at $4.00 per hour
Last month, employees actually worked 2,500

hours to make 2,000 parkas. Actual variable
manufacturing overhead for the month was
$10,500.

10-58
Variances Summary

× × ×
× × ×
= $10,500 = $10,000 = $9,600
Spending variance Efficiency variance


10-59
Variances Summary

× × ×
× $10,500×  2,500 hours ×
$4.20 per hour $4.00 per per
= $4.20 hourhour $4.00 per hour
= $10,500 = $10,000 = $9,600


10-60
Variances Summary

× × ×
× 1.2 hours per ×parka  2,000 ×
$4.20 per hour parkas$4.00 per hour
= 2,400 hours $4.00 per hour
= $10,500 = $10,000 = $9,600


10-61
Variances: Using Factored Equations
Variable manufacturing overhead spending variance

VMSV = AH (AR - SR)
= 2,500 hours ($4.20 per hour – $4.00 per hour)
= 2,500 hours ($0.20 per hour)
= $500 unfavorable
Variable manufacturing overhead efficiency variance
VMEV = SR (AH - SH)
= $4.00 per hour (2,500 hours – 2,400 hours)
= $4.00 per hour (100 hours)
= $400 unfavorable

10-62
Hanson Inc. has the following variable

manufacturing overhead standard to
manufacture one Zippy:
1.5 standard hours per Zippy at $3.00 per
direct labor hour
Last week, 1,550 hours were worked to make

1,000 Zippies, and $5,115 was spent for
variable manufacturing overhead.

10-63
Hanson’s spending variance (VOSV) for

variable manufacturing overhead for
the week was:
b. $400 favorable.
d. $300 favorable.

10-64
Hanson’s spending variance (VOSV) for

variable manufacturing overhead for
the week was:
b. $400 favorable.
VOSV = AH(AR - SR)
VOSV = 1,550 hrs($3.30 - $3.00)
d. $300 favorable. VOSV = $465 unfavorable

10-65
Hanson’s efficiency variance (VOEV) for

variable manufacturing overhead for the
week was:
b. $435 favorable.
d. $150 favorable.

10-66
Hanson’s efficiency variance (VOEV) for

variable manufacturing overhead for the
week was:
b. $435 favorable. 1,000 units × 1.5 hrs per unit
d. $150 favorable.
VOEV = SR(AH - SH)
VOEV = $3.00(1,550 hrs - 1,500 hrs)
VOEV = $150 unfavorable
10-67

× × ×
× × ×
= $5,115 = $4,650 = $4,500

10-68
Variance Analysis and
Management by Exception
Larger variances, in
How do I know dollar amount or as
which variances to a percentage of the
investigate? standard, are
investigated first.

10-69 Exhibit
10-9
A Statistical Control Chart
Warning signals for investigation
Favorable Limit
• •
• • •
Desired Value
• •
Unfavorable Limit •
•
1 2 3 4 5 6 7 8 9
Variance Measurements

10-70
Advantages of Standard Costs
Management by Promotes economy

exception and efficiency
Advantages
Enhances
Simplified responsibility
bookkeeping accounting

10-71
Potential Problems with Standard Costs
Emphasizing standards Favorable

may exclude other variances may
important objectives. be misinterpreted.
Potential
Problems
Standard cost Emphasis on
reports may negative may
not be timely. impact morale.
Continuous
Invalid assumptions improvement may
about the relationship be more important
between labor than meeting standards.
cost and output.
10-72
Understand how a
balanced scorecard
fits together and
how it supports a
company’s strategy.

10-73
The Balanced Scorecard
Management translates its strategy into

performance measures that employees
understand and accept.
Financial Customers
Performance
measures
Internal Learning
business and growth
processes
10-74
The Balanced Scorecard: From Exhibit
10-11
Strategy to Performance Measures

Performance Measures
Financial What are our
Has our financial financial goals?
performance improved?
Customer What customers do Vision

we want to serve and
Do customers recognize that how are we going to and
we are delivering more value? win and retain them? Strategy
Internal Business Processes What internal busi-

Have we improved key business ness processes are
processes so that we can deliver critical to providing
more value to customers? value to customers?
Learning and Growth

Are we maintaining our ability
to change and improve?
10-75
The Balanced Scorecard:
Non-financial Measures
The balanced scorecard relies on non-financial measures

in addition to financial measures for two reasons:
 Financial measures are lag indicators that summarize

the results of past actions. Non-financial measures are
leading indicators of future financial performance.
 Top managers are ordinarily responsible for financial

performance measures – not lower level managers.
Non-financial measures are more likely to be
understood and controlled by lower level managers.
10-76
The Balanced Scorecard for Individuals
The entire organization Each individual should

should have an overall have a personal
balanced scorecard. balanced scorecard.
A personal scorecard should contain measures that can be

influenced by the individual being evaluated and that
support the measures in the overall balanced scorecard.
10-77
A balanced scorecard should have measures

that are linked together on a cause-and-effect basis.
If we improve Another desired

Then
one performance performance measure
measure . . . will improve.
The balanced scorecard lays out concrete

actions to attain desired outcomes.

10-78
and Compensation
Incentive compensation
should be linked to
balanced scorecard
performance measures.

10-79
The Balanced Scorecard Exhibit
10-13
Jaguar Example
Profit
Financial
Contribution per car
Number of cars sold

Customer
Customer satisfaction
with options
Internal
Business Number of Time to
options available install option
Processes
Learning Employee skills in

and Growth installing options
10-80
Jaguar Example
Profit
Number of cars sold
Customer satisfaction Results

with options Satisfaction
Increases
Strategies
Increase Number of Time to
Options options available install option Time
Decreases
Increase Employee skills in

Skills installing options
10-81
Jaguar Example
Profit

Results
Cars sold
Number of cars sold Increase
Increases
Number of Time to
Employee skills in
installing options
10-82
Jaguar Example
Profit
Results
Contribution per car Contribution
Increases
Number of cars sold
Increases
Number of Time to
options available install option Time
Decreases
Employee skills in
installing options
10-83
Jaguar Example
Results
Profit Profits
Increase
If number
Contribution per car Contribution
of cars sold Increases
and contribution
Cars Sold
per car increase, Number of cars sold
Increases
profits
increase. Customer satisfaction
with options
Number of Time to
Employee skills in
installing options
10-84
Advantages of Graphic Feedbck
Tim e to Install an Option
35
Time to Install in Minutes
30
25
20
15
10
5
0
1 2 3 4 5 6 7 8 9 10
Week
When interpreting its performance, Jaguar will look for

continual improvement. It is easier to spot trends or
unusual performance if these data are presented
McGraw-Hill/Irwin
graphically. Copyright © 2008, The McGraw-Hill Companies, Inc.
10-85
Compute delivery cycle

time, throughput time,
and manufacturing
cycle efficiency (MCE).

10-86
Delivery Performance Measures
Order Production Goods

Received Started Shipped
Process Time + Inspection Time

Wait Time + Move Time + Queue Time
Throughput Time
Delivery Cycle Time
Process time is the only value-added time.

10-87
Delivery Performance Measures
Order Production Goods

Received Started Shipped
Process Time + Inspection Time

Wait Time + Move Time + Queue Time
Throughput Time
Delivery Cycle Time

Manufacturing Value-added time
Cycle =
Efficiency Manufacturing cycle time
10-88
Quick Check 
A TQM team at Narton Corp has recorded the

following average times for production:
Wait 3.0 days Move 0.5 days
Inspection 0.4 days Queue 9.3 days
Process 0.2 days
What is the throughput time?
a. 10.4 days
b. 0.2 days
c. 4.1 days
d. 13.4 days
10-89
Quick Check 

Process 0.2 days
What is the throughput time?
a. 10.4 days
b. 0.2 days
Throughput time = Process + Inspection + Move + Queue
c. 4.1 days = 0.2 days + 0.4 days + 0.5 days + 9.3 days
= 10.4 days
d. 13.4 days
10-90
Quick Check 

Process 0.2 days
What is the Manufacturing Cycle Efficiency?
a. 50.0%
b. 1.9%
c. 52.0%
d. 5.1%
10-91
Quick Check 

Process 0.2 days
What is the Manufacturing Cycle Efficiency?
a. 50.0%
MCE = Value-added time ÷ Throughput time
b. 1.9%
= Process time ÷ Throughput time
c. 52.0% = 0.2 days ÷ 10.4 days
d. 5.1% = 1.9%
10-92
Quick Check 

Process 0.2 days
What is the delivery cycle time?
a. 0.5 days
b. 0.7 days
c. 13.4 days
d. 10.4 days
10-93
Delivery cycleQuick Check

time = Wait 
time + Throughput time
= 3.0 days + 10.4 days
= 13.4 days
Process 0.2 days
What is the delivery cycle time?
a. 0.5 days
b. 0.7 days
c. 13.4 days
d. 10.4 days
General Ledger Entries
to Record Variances
Appendix 10A

10-95
Prepare journal entries

to record standard
costs and variances.
(Appendix 10A)

10-96
Appendix 10A
Journal Entries to Record Variances
We will use information from the Glacier Peak Outfitters

example presented earlier in the chapter to illustrate journal
entries for standard cost variances. Recall the following:
Material Labor
AQ × AP = $1,029 AH × AR = $26,250
AQ × SP = $1,050 AH × SR = $25,000
SQ × SP = $1,000 SH × SR = $24,000
MPV = $21 F LRV = $1,250 U
MQV = $50 U LEV = $1,000 U
Now, let’s prepare the entries to record

the labor and material variances.
10-97
Appendix 10A
Recording Material Variances
GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Raw Materials 1,050
Materials Price Variance 21
Accounts Payable 1,029
To record the purchase of material
Work in Process 1,000

Materials Quantity Variance 50
Raw materials 1,050
To record the use of material

10-98
Appendix 10A
Recording Labor Variances
GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process 24,000
Labor Rate Variance 1,250
Labor Efficiency variance 1,000
Wages Payable 26,250
To record direct labor

10-99
Appendix 10A – Recording Variable
Manufacturing Overhead Variances
Variable manufacturing
overhead variances are usually not
recorded in the accounts separately,
but are determined as part of the
general analysis of overhead that is
covered in the next chapter.

10-100
Cost Flows in a Standard Cost System
• Inventories are recorded at standard cost.

• Variances are recorded as follows:
 Favorable variances are credits, representing
savings in production costs.
 Unfavorable variances are debits, representing
excess production costs.
• Standard cost variances are usually closed to
cost of goods sold.
 Unfavorable variances increase cost of goods sold.
 Favorable variances decrease cost of goods sold.

10-101
End of Chapter 10

Standard Costs and The Balanced Scorecard: Chapter Ten

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Standard Costs and the

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Standards are benchmarks or “norms”

Quantity standards Cost (price)

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Deviations from standards deemed significant

Type of Product Cost

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Setting Standard Costs

Accountants, engineers, purchasing

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Setting Standard Costs

Should we use I recommend using practical

Explain how direct

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Setting Direct Material Standards

Final, delivered Summarized in

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Six Sigma advocates have sought to

As a result allowances for waste and

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Setting Direct Labor Standards

Often a single Use time and

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Setting Variable Overhead Standards

The rate is the The activity is the

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A standard cost card for one unit of

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Standards vs. Budgets

Are standards the A standard is a per

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Price and Quantity Standards

Price and and quantity standards are

 The purchasing manager is responsible for raw

 The buying and using activities occur at different times.

A General Model for Variance Analysis

Price Variance Quantity Variance

Difference between Difference between

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A General Model for Variance Analysis

Price Variance Quantity Variance

Materials price variance Materials quantity variance

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Actual quantity is the amount of direct

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Standard quantity is the standard quantity

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

A General Model for Variance Analysis

Actual Quantity Actual Quantity Standard Quantity

Price Variance Quantity Variance

Actual price is the amount actually

McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.