Question

1. From your personal work experience, identify three variances where the budgeted amounts for your unit were different from the amounts actually used. These variances could involve variances in patients, revenues, expenses, personnel, equipment, or supplies.
2. Identify whether these variances were positive or negative.
3. Then, give a reason for why each of the three variances occurred

Answer 1

The variance analysis in our company usually comes up with variances under following sales and cost items:

a) Sales volume variance: The monthly variance analysis of the budgets with the actual brings variances in the units sold. In variance is positive in some month and negative in the other month. This is due to estimation of the demand raised by various stores for the product in any month is not an easy task as new depots and stores keeps on opening and closing. There independent demands keeps varying also.

b) Material price variance: The variance analysis shows that the standard price considered in the budget always differ of the actual average material price comes up. In all the month, company has to face negative Material Price Variance. The reason of difference is that the standards are priced on graded quality of material but the prices of the material in the market varies a lot along-with various grades of material.

c) Labor Idle Time Variance: The variance analysis gets the Factory Labor Idle Time Variance in every odd month. The work hours cards of labors in many month shows many unproductive hours which give rise to the Idle Time Variance. This variance is a negative one and adversely impacts the profitability of the company due to labor hours paid of no production.