Explain the types of variances, In detail examples. How would you analysis the cost change during standard costing.

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Accepted Answer

Types of variances in standard costing include material, labor, and overhead variances. Analysis involves comparing actual costs to standard costs.

Material variance: the difference between actual material costs and standard material costs. Example: purchasing materials at a higher price than expected.
Labor variance: the difference between actual labor costs and standard labor costs. Example: paying workers overtime when it was not budgeted for.
Overhead variance: the difference between actual overhead costs and standard overhead costs. Example: unexpected maintenance costs increasing overhead expenses.
Analysis involves calculating the total variance, investigating the reasons for the variance, and taking corrective actions to improve future cost control.
Comparing the actual costs to the standard costs helps identify inefficiencies and areas for improvement in the production process.

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