which of the following variances are most similar with respect to the manner in which they are calculated?
Which of the following variances are most similar with respect to the manner in which they are calculated?
Answer: Variance analysis in accounting involves calculating and comparing different variances to analyze the differences between actual and standard costs. Some of the variances that are most similar in terms of how they are calculated are:
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Material Price and Labor Rate Variances: Both material price variance and labor rate variance are calculated by multiplying the difference in the actual price or rate per unit of material or labor by the actual quantity used. These variances help to analyze the impact of changes in prices or rates on costs.
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Material Efficiency and Labor Efficiency Variances: Material efficiency variance and labor efficiency variance are calculated by multiplying the actual quantity of materials or hours of labor used above or below standard by the standard price or rate. These variances help to assess how changes in the quantity used affect costs.
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Variable Overhead Spending and Efficiency Variances: Variable overhead spending variance is calculated by the difference between the actual variable overhead cost incurred and the budgeted variable overhead cost based on the actual activity level. Variable overhead efficiency variance, on the other hand, is calculated by comparing the actual hours worked with the standard hours allowed for the actual level of production.
These variances are similar in that they involve comparing actual costs or quantities with standard costs or quantities to identify the reasons for deviations and help managers take corrective actions to improve performance.