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Meanings of variance

AAT Level 4 Financial Performance

TermDefinition
Materials price variance How much of the variance is because we the price per kg/litre was different to what we had budgeted.
Materials usage variance How much of the variance is due to us using a different amount of material to what we had budgeted.
Labour rate variance How much of the variance is because we the paid a different labour rate per hour to what we had budgeted
Labour efficiency variance How much of the variance is due to us using a different amount of labour per unit to what we had budgeted.
Idle time variance Compare the total labour hours paid for With The productive labour hours
FIXED OVERHEAD EXPENDITURE VARIANCE Differences due to cost Actual overheads may be different to budgeted overheads.
FIXED OVERHEAD VOLUME VARIANCE Differences in production levels. If our absorption activity rate (units/machine hours/ labour hours) is different to budget, we will have absorbed a different amount of overhead.
Fixed overhead efficiency variance For example, our overheads may have been absorbed on a labour hour basis. But what if our labour is really efficient and making things more quickly? We will absorb less overheads. This variance will measure it
Fixed overhead capacity variance We might be able to get more out of our resource. For example, staff may work overtime, or machine may run for longer. Therefore they are able to produce more. Or, they may have been operating for less and therefore unable to produce as much.
Created by: KayeDavis
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