Cost Variance

Material cost variances = AQ X AP – SQ X SP

Material usage variances = (AQ – SQ) X SP

Material price variance = (AP – SP) X AQ

Material Price Variance         = (1.20 – 1.18) x 25,600

= 512

Labour Rate Variance   = Actual Time x (STD Rate – Actual Rate)

= 20,000 (1.80 – 1.75)

= 1,000

Material Usage Variance

STD Qty for Actual Output    = 25,600 x 4

= 1,02,400

Usage Variance                   = 1.20 (1,02,400 – 1,02,400)

= 0

Material Cost Variance                 = 1.18 x 1,02,400 – 1.20 x 1,02,400

= 2,048

Labour Time Variance           = STD Rate (STD Time – Actual Time)

STD Time for Actual Output = STD Hours x Unit

= 3 x 6,500

= 19,500

Labour Time Variance           = 1.80 (19,500 – 20,000)

= 900 (adverse)

Labour Cost Variance           = Standard Cost – Actual Cost

= 1.80 x 19,500 – 1.75 x 20,000

= 35,100 – 35,000

= 100 (favourable)