This is a method of variance analysis which reports mix variances
between products. For example, take the following information:
Volume: Rate:
Product Actual Budget Actual Budget
A 700 400 3 4
B 100 300 2 1
C 300 300 1 2
Total 1100 1000 2.36 2.50
The Answer:
Budget
Actual
Profit Rate
Budget Profit
Budget Mix
Actual Mix
Volume
Mix
Total
A (Budget)
400
0
4
1600
0.40
0.00
-940
-660
-1600
A (Actual)
0
700
3
0
0.00
0.64
1750
350
2100
B (Budget)
300
0
1
300
0.30
0.00
-795
495
-300
B (Actual)
0
100
2
0
0.00
0.09
250
-50
200
C (Budget)
300
0
2
600
0.30
0.00
-765
165
-600
C (Actual)
0
300
1
0
0.00
0.27
750
-450
300
Total
1000
1100
2.50
2500
1.00
1.00
250
-150
100
The Answer Explanation:
BPRDiff = (Budgeted Product Profit Rate - Budgeted Group Profit Rate)
MixVar = (Actual Product Sales Mix - Budgeted Product Sales Mix)
The effect on mix variance of the group is a direct function of total actual sales for the group (TotActGrpSls). Given these component parameters, we can measure the impact of any given product's mix variance on the group (Mix Variance = MV) as follows:
MV = (TotActGrpSls x MixVar x BPRDiff)
The only other component of the product's profit variance is volume variance (VV). Order of calculation is important; MV must be calculated before VV. VV is a simple residual calculation:
VV = [(TotActPrdSls - TotBudPrdSls) x Budgeted Product Profit Rate] - MV
For Product A (Budget) :
BPRDiff = 4 - 2.50
BPRDiff = 1.50
MixVar = 0.00 - 0.40
MixVar = -0.40
MV = 1100 x -0.40 x 1.50
MV = -660
VV = ((0 - 400) x 4) - (-660)
VV = -940
Note: The above calculations apply equally to both unit profitability (shown) or dollar profitability.
total master-budget variances
should all variances be investigated
An F-test can be used for variances.
Adverse variances means unfavourable variance which is actual expenses are more than budgted variance.
The sales mix percentage is calculated by dividing the sales for each product in the mix by the total sales for all products. Further calculations can be figured out from the sales mix percentage.
Overhead Variances 13-48 pg 62213-48 Overhead VariancesStudy Appendix 13. Consider the following data for the Rivera Company:Factory OverheadFixed VariableActual incurred $14,200 $13,300Budget for standard hours allowedfor output achieved 12,500 11,000Applied 11,600 11,000Budget for actual hours of input 12,500 11,400From the above information, fill in the blanks below. Be sure to mark your variances F for favorableand U for unfavorable.a. Flexible-budget variance $______ Fixed $______Variable $______b. Production-volume variance $______ Fixed $______Variable $______c. Spending variance $______ Fixed $______Variable $______d. Efficiency variance $______ Fixed $______Variable $______
Equal variances, independent observations and normality
Price and quantity variances are computed respectively because different managers are usually responsible for buying and for using inputs.
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
density of send and aggrigate
Momentum transfer or pressure variances.
The difference between two variances