ACCA PM Chapter 13 - STANDARD COSTING AND BASIC VARIANCE ANALYSIS

Total Variances

Possible reasons for Adverse Materials

Expenditure Variance:

• Price Increase
• "Bad Buying"
• Mistake in Budgeting
• Deliberately decided to buy better material which costs more
• To reduce waste -> favorable usage variance
• To produce faster -> favorable efficiency variance
• Make better products
• Sell More -> favorable sales volume
• Increase Selling Price -> favorable price variance.

The idea of variances affecting one another is called the Interrelationship of Variances.

Source: https://opentuition.com/acca/pm/acca-performance-management-pm-lectures/