9. Revenue and Other Variances_w9.pdf - AGENDA Further...

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AF 3112
MANAGEMENT ACCOUNTING 2
Standard Costing:
Revenue and Other Variances
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AGENDA
Further breakdown of usage/efficiency
variance

Mix variance and yield variance
Revenue variance

Selling price variance and sales volume variance
Summary on variance analysis framework
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Master Budget Variance (for operating
income)
Summary of Variance
Analysis
Flexible Budget
Variance
Sales Volume
Variance
Selling Price
Variance
Direct Material
Variance
Direct Labor
Variance
Variable Manuf.
Overhead Variance
Fixed Manuf.
Overhead Variance
Direct materials
price variance
Direct materials
efficiency variance
Direct labor
price variance
Direct labor
efficiency variance
A ctual input Q uantity
* A ctual P rice
A ctual input Q uantity
* S tandard P rice
S tandard input Q uantity allowed
for actual output* S tandard P rice
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Yield and Mix Variances
Direct Material/Direct Labor
Flexible Budget Variance
Price/Rate Variance Usage/Efficiency Variance
Mix Variance
Yield Variance
AQ * AP
AQ * SP SQ * SP
AQ * SP
=AQ ’ * AM * SP
SQ * SP
=SQ ’ * SM * SP
AQ ’ * SM * SP
M = Mix (in %)

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Overview on Mix & Yield Variance
An extension of

Direct Material Usage Variance

Direct Labor Efficiency Variance
Objective

Analyze the effect of mixing different direct materials
or types of workers in the manufacturing process
when multiple input exists, assuming that the
inputs can be substituted.
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Mix Variance

A variance incurred when the actual input mix
is different from the standard mix
Yield Variance

A variance incurred when actual output (yield)
different from standard output (yield)

The output difference is likely due to a different
mix (of inputs) used
Overview on Mix & Yield Variance
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Example – Mix and Yield Variance
XYZ produced a product with budget as follows,
60% of material input A at $200 per ton
40% of material input B at $100 per ton
1.6 tons of input quantities are required to produce
1 ton of output
XYZ produced 300 tons of the product in a
particular period. The actual quantities of inputs
used are 275 tons of input A and 225 tons of input
B
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Example – Mix and Yield Variance
Mix Variance
AM SM AM ‐ SM AQ SP Variance
A 0.55 0.6 ‐ 0.05 500 200 5000 F
B 0.45 0.4 0.05 500 100 2500 U
Total 2500 F
Yield Variance
AQ SQ (Total)* AQ ‐ SQ SM SP Variance
A 500 480 20.00 0.6 200 2400 U
B 500 480
20.00
0.4 100
800 U
Total
3200 U
Usage Variance
SP AQ SQ SP x AQ SP x SQ Variance
A 200 275 288 55000 57600 2600 F
B 100 225 192 22500 19200 3300 U

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Overview on Revenue Variance
Objective

Assess the firm’s marketing effectiveness and
sales performance through by determining and
investigating the following:

Change in selling price

Change in sales volume

Change in sales mix and sales quantity
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Overview on Revenue Variance
Revenue/Sales Variance
Selling Price Variance Sales Volume Variance
Sales Mix Variance