Variance Analysis

When actual material costs are different than total standard costs determine the cause.
Variance Analysis

When actual material costs are different than total standard costs determine the cause.
Contribution Margin Analysis
Management has received a special order. How will profitability be impacted if the order is accepted?
Contribution Margin Analysis
Management has received a special order. How will profitability be impacted if the order is accepted?
CVP – Breakeven Analysis If a company expects a drop in raw material price but all other revenue and cost factors to be unaffected, what will be the revised breakeven point in sales and units?
CVP – Breakeven Analysis If a company expects a drop in raw material price but all other revenue and cost factors to be unaffected, what will be the revised breakeven point in sales and units?
Cvp Tools – Break Even Analysis
A
Determine Selling Price/unit
A
Determine Selling Price/unit
Scenario
1. To determine Sales required to cover operating expenses
2. What volume of sales required for desired profit
3. Break even where total costs are covered by total revenue.
Scenario
4. To determine Sales required to cover operating expenses
5. What volume of sales required for desired profit
6. Break even where total costs are covered by total revenue.
B
Determine Variable Costs/unit
B
Determine Variable Costs/unit
C
Calculate Contribution Margin
(A – B)
C
Calculate Contribution Margin
(A – B)
E
Calculate Break Even
(Fixed Costs + Desired Operating Income / CM/unit)
E
Calculate Break Even
(Fixed Costs + Desired Operating Income / CM/unit)
D
Determine Fixed Costs
D
Determine Fixed Costs
Cvp Tools – Contribution Margin Analysis
A
Determine CM/unit before
(Sp – V)
A
Determine CM/unit before
(Sp – V)
Scenario
1. To determine Change in Operating Income
2. If fixed costs change how does it affect Income?
3. If Sales increase or decrease how does it affect Income
4. In multi product environment determine cm by bundling to determine ultimate mix.
5. To determine Before tax income (Operating Income) = (divide by 1taxrate) Scenario
6. To determine Change in Operating Income
7. If fixed costs change how does it affect Income?
8. If Sales increase or decrease how does it affect Income
9. In multi product environment determine cm by bundling to determine ultimate mix.
10. To determine Before tax income (Operating Income) = (divide by 1taxrate)
B
Determine CM/unit after
(New SpV)
B
Determine CM/unit after
(New SpV)
C
Calculate Increase or Decrease in CM
(A – B)
C
Calculate Increase or Decrease in CM
(A – B)
E
Calculate Increase or Decrease in Operating Income
(C – D)
If positive = Good
Negative = No
E
Calculate Increase or Decrease in Operating Income
(C – D)
If positive = Good
Negative = No
D
Calculate Change in Fixed Costs
(Current FC – New FC)
D
Calculate Change in Fixed Costs
(Current FC – New FC)
Variance Analysis
AQ = “actual quantity” of input used to produce the output. AP = “actual price” of the input used to produce the output. SQ and SP = “standard” quantity and price that was anticipated. Variance analysis can be conducted for material, labor, and overhead.
DIRECT MATERIAL VARIANCES
Scenario
* When actual material costs are different than total standard costs determine the cause. (Price Variance + Quantity Variance) * Price Variance (SPAP) x AQ  A variance that reveals the difference between the standard price for materials purchased and the amount actually paid for those materials * Quantity Variance (SQ – AQ) x SP  A variance that compares the standard quantity of materials that should have been used to the actual quantity of materials used Scenario...