In: Accounting
Which of the following variances are most similar with respect to the manner in which they are calculated?
Multiple Choice
Labor rate variance and labor efficiency variance.
Material price variance and material quantity variance.
Material price variance, material quantity variance, and total material variance.
Material price variance and labor rate variance.
Material price variance and labor efficiency variance.
· Correct Answer = Option #4
‘material price variance’ and ‘labor rate variance’ are almost
similar so far as calculation method is concerned.
· Material Price Variance = (Standard price – Actual price) x actual qty of material purchased or used.
· Labor Rate Variance = (Standard rate per hours – Actual rate per hour) x actual no of hours used.