1.
Material Variances
Variance Formula Meaning
Measures cost
Material Price (Standard Price - Actual Price) × Actual difference due to
Variance (MPV) Quantity price changes in raw
materials.
Measures inefficiency
Material Usage (Standard Quantity - Actual Quantity) ×
in material
Variance (MUV) Standard Price
consumption.
Measures cost
Material Mix (Actual Mix Quantity - Standard Mix
impact of changing
Variance (MMV) Quantity) × Standard Price
material proportions.
Measures efficiency
Material Yield (Actual Output - Standard Output) × in converting raw
Variance (MYV) Standard Cost per Unit materials into final
products.
2. Labor Variances
Variance Formula Meaning
Labor Rate (Standard Rate - Actual Rate) × Actual Measures wage rate
Variance (LRV) Hours differences.
Labor Efficiency (Standard Hours - Actual Hours) × Standard Measures worker
Variance (LEV) Rate efficiency.
Measures impact of
Labor Mix (Actual Mix Hours - Standard Mix Hours) ×
different skill levels of
Variance (LMV) Standard Rate
workers.
Measures labor
Labor Yield (Actual Output - Standard Output) × efficiency in
Variance (LYV) Standard Labor Cost per Unit producing final
output.
3. Overhead Variances
Variance Formula Meaning
Variable (Standard VOH Rate - Actual VOH Rate) × Measures cost
Overhead
Spending difference in variable
Actual Hours
Variance overheads.
(VOSV)
Variable
Overhead
(Standard Hours - Actual Hours) × Standard Measures efficiency
Efficiency
VOH Rate of resource usage.
Variance
(VOEV)
Fixed Overhead
Measures difference
Spending Budgeted Fixed Overhead - Actual Fixed
in planned vs. actual
Variance Overhead
fixed costs.
(FOSV)
Fixed Overhead Measures impact of
Volume (Standard Hours - Budgeted Hours) × Fixed production volume
Variance Overhead Rate changes on fixed
(FOVV) costs.
4. Alternative Variance Methods
Method Variance Components Formulas
Two- 1. Overhead Spending Variance OSV = Actual Overhead - Budgeted
Variance (OSV) 2. Overhead Volume Overhead OVV = Budgeted Overhead
Method Variance (OVV) - Applied Overhead
OSV = Actual Overhead - Budgeted
1. Overhead Spending Variance
Three- Overhead OEV = (Standard Hours -
(OSV) 2. Overhead Efficiency
Variance Actual Hours) × Standard Overhead
Variance (OEV) 3. Overhead
Method Rate OVV = Budgeted Overhead -
Volume Variance (OVV)
Applied Overhead
1. Variable Overhead Spending
Variance (VOSV) 2. Variable
Four- Overhead Efficiency Variance
Variance (VOEV) 3. Fixed Overhead See individual formulas above.
Method Spending Variance (FOSV) 4. Fixed
Overhead Volume Variance
(FOVV)
5. Combined Price-Quantity Variance
Variance Formula Meaning
Combined Price- (Standard Price × Standard Captures the total effect of
Quantity) - (Actual Price × price and quantity changes on
Quantity Variance
Actual Quantity) costs.
Key Takeaways:
1. Material, Labor, and Overhead Variances measure cost deviations from
standards.
2. Mix and Yield Variances analyze input proportions and production efficiency.
3. Variance Methods (Two, Three, and Four-Variance) provide different levels of
cost control.
4. Combined Price-Quantity Variance captures both cost and efficiency
changes.
