Standard Costing

and Variance
Analysis
1
Factory
Overhead
Variance
Actual FOH (AFOH) BAAH BASH Standard FOH (SFOH)

BAAH – Budget Adjusted for Actual Hours is a combination of:

Fixed: Budgeted Fixed FOH Note:
Variable: “Actual Hours” x Variable OH rate
Actual and Standard have
BASH – Budget Adjusted for Standard Hours is a combination of: the same computation with
Fixed: Budgeted Fixed FOH DM and DL
Variable: “Standard” Hours x Variable OH rate
 Actual production x
Actual FOH (AFOH) standard FOH Standard FOH (SFOH)
P 25,000 hours/unit x standard P 24,000
FOH rate/hour

(2,000 units x 4 hours x

3/hr)

Given:
1.) Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour
2.) Actual production 2,000 units
3.) Actual hours 7,500 hours
4.) Actual Factory overhead incurred (70% fixed) P 25,000
BAAH – Budget Adjusted at Actual Hours

BAAH – Budget Adjusted for Actual Hours is a combination of:

Fixed: Budgeted Fixed FOH
Variable: “Actual Hours” x Variable OH rate

Budgeted Fixed FOH + “Actual Hours” x Variable OH rate

Given:
1.) Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour
2.) Actual production 2,000 units
3.) Actual hours 7,500 hours
4.) Actual Factory overhead incurred (70% fixed) P 25,000
------------------------------------------------------------------------------------------------------------
5.) Budgeted Fixed Factory Overhead P 20,000
6.) Normal Production 2,500 units
 Remember:
BAAH – Budget Adjusted for Actual Hours This rate is already a
combination of Fixed and
Variable
Budgeted Fixed FOH + “Actual Hours” x Variable OH rate

Given: We can get the Fixed OH

rate by:
1.) Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour
2.) Actual production 2,000 units (BFFOH/Normal Prod)
Hours per unit of Product
3.) Actual hours 7,500 hours
4.) Actual Factory overhead incurred (70% fixed) P 25,000
(20,000/2,500 units)
------------------------------------------------------------------------------------------------------------ 4 hours
5.) Budgeted Fixed Factory Overhead (BFFOH) P 20,000
6.) Normal Production 2,500 units

Fixed OH rate = P 2.00/hr

Variable OH rate = P 1.00/hr

Budgeted Fixed FOH + (“Actual Hours” x Variable OH rate)

P 20,000 + ( 7,500 hrs x P 1.00/hr ) = P 27,500 BAAH

Actual FOH (AFOH) BAAH BASH Standard FOH (SFOH)
P 25,000 P 27,500 ? P 24,000

BAAH – Budget Adjusted for Actual Hours is a combination of:

Fixed: Budgeted Fixed FOH Note:
Variable: “Actual Hours” x Variable OH rate
Actual and Standard have
BASH – Budget Adjusted for Standard Hours is a combination of: the same computation with
Fixed: Budgeted Fixed FOH DM and DL
Variable: “Standard” Hours x Variable OH rate
 Remember:
BASH – Budget Adjusted for Standard Hours This rate is already a
combination of Fixed and
Variable
Budgeted Fixed FOH + “Standard Hours” x Variable OH rate

Given: We can get the Fixed OH

rate by:
1.) Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour
2.) Actual production 2,000 units (BFFOH/Normal Prod)
Hours per unit of Product
3.) Actual hours 7,500 hours
4.) Actual Factory overhead incurred (70% fixed) P 25,000
(20,000/2,500 units)
------------------------------------------------------------------------------------------------------------ 4 hours
5.) Budgeted Fixed Factory Overhead (BFFOH) P 20,000
6.) Normal Production 2,500 units

Remember: Standard hours is 2,000 units x 4 hours = Fixed OH rate = P 2.00/hr

always based on units of production 8,000 hours
Variable OH rate = P 1.00/hr
Budgeted Fixed FOH + (“Standard Hours” x Variable OH rate)

P 20,000 + ( 8,000 hrs x P 1.00/hr ) = P 28,000 BASH

Actual FOH (AFOH) BAAH BASH Standard FOH (SFOH)
P 25,000 P 27,500 P 28,000 P 24,000

BAAH – Budget Adjusted for Actual Hours is a combination of:

Fixed: Budgeted Fixed FOH Note:
Variable: “Actual Hours” x Variable OH rate
Actual and Standard have
BASH – Budget Adjusted for Standard Hours is a combination of: the same computation with
Fixed: Budgeted Fixed FOH DM and DL
Variable: “Standard” Hours x Variable OH rate
2
Variance
Analysis
Actual FOH (AFOH) BAAH BASH Standard FOH (SFOH)
P 25,000 P 27,500 P 28,000 P 24,000

(AFOH – BAAH) (BAAH - BASH) (BASH - SFOH)

Spending Variance Efficiency Variance Volume Variance
2,500 F 500 F 4,000 UF
Spending – Efficiency
or
(AFOH - BASH)
Controllable Variance
Remember in variance: Controllable – Volume
If same = add
3,000 F Or
If different = subtract (AFOH – SFOH)
Total Factory Overhead
Variance
1,000 UF
Actual FOH (AFOH) BAAH
P 25,000 P 27,500 Fixed Spending Variance
Actual Fixed FOH - BFFOH
(P 25,000 x 70%) – P 20,000 = 2,500 F
17,500 (Actual) - 20,000 (Budgeted)
Variable Spending Variance 2,500 F

Actual Variable FOH – (Actual hours x VOH rate

(AFOH – BAAH)
Spending Variance (25,000 x 30%) – (7,500 hrs x P1.00/hr) = 0
2,500 F 7,500 (Actual) – 7,500 (Budgeted)

Given:
1.) Standard factory overhead cost per unit of product: 4 hours at P3.00 per hour
2.) Actual production 2,000 units
3.) Actual hours 7,500 hours
4.) Actual Factory overhead incurred (70% fixed) P 25,000
------------------------------------------------------------------------------------------------------------
5.) Budgeted Fixed Factory Overhead (BFFOH) P 20,000
6.) Normal Production 2,500 units
3
Material
Price, Mix
and Yield
Variance
Analysis
When the production process involves combining or mixing several materials in varying
proportions, the (3) way analysis (Price, Mix and Yield) is used.

Price Variance
The difference in prices x actual quantity (computed for each type of material then
summarized to get the net price variance)

Mix Variance
Total actual quantities at standard prices less total actual input at average standard input cost (ASIC)

Yield Variance
Total actual quantity input at average standard input cost (ASIC) less Total actual quantity output at
actual output x ave std cost (ASOC) = (TAQ input x ASIC) – (TAQ output x ASOC)
A Company combines three types of materials to produce its product. For 100 kilo batch (Standard
output quantity) , the standard cost for materials are as follows:

Material Standard Standard Price Total Standard

Quantity Input Input Cost
A 60 kgs P5 P300

B 36 kgs P4 P144

C 24 kgs P3 P72

Total 120 kgs P516

During August, the Company produced 200 batches or 20,000 kilos of its product. Materials used for
this production were:

Material Actual Quantity Actual Price Total

A 12,600 kgs P4.80 P60,480

B 7,300 kgs P4.10 P29,930

C 4,700 kgs P3.40 P15,980

Total 24,600 kgs P106,390

Price Variance

The difference in prices x actual quantity (computed for each type of material then
summarized to get the net price variance)

Material Actual Price – Standard Difference in Actual Quantity Price Variance

Price Prices
A (P4.80 – P5.00) P0.20 F 12,600 kgs P2,520 F

B (P4.10 – P4.00) P0.10 UF 7,300 kgs P730 UF

C (P3.40 – P3.00) P0.40 UF 4,700 kgs P1,880 UF

Total P90 UF
Price Variance
Mix Variance

Total actual quantities at standard prices less total actual input at average standard input cost (ASIC)

Material Actual Quantity Standard Price Total

A 12,600 kgs P5 P63,000

B 7,300 kgs P4 P29,200

C 4,700 kgs P3 P14,100

Actual input P106,300

at standard
Price

ASIC = Total std input cost / Total std input quantity = P516 / P120 = P106,300 (Actual)
P4.30 per kilo (P105,780) (Budgeted)
P520 UF
Total actual input x ASIC = 24,600 x P4.30 = P105,780 Mix Variance
Yield Variance

Total actual quantity input at average standard input cost (ASIC) less Total actual quantity output at actual
output x ave std cost (ASOC) = (TAQ input x ASIC) – (TAQ output x ASOC)

ASIC = Total std input cost / Total std input quantity = P516 / P120 =
P4.30 per kilo

ASOC = Total std output cost / Total std output quantity = P516 / P100
= P5.16 per kilo

TAQ x (ASIC)= 24,600 x P4.30 = P105,780

TAQ x (ASOC)= 20,000 x P5.16 = P103,200

P105,780 – P103,200 = P2,580 F

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