Question

There are three (3) for price variance and three (3) for quantity variance. Explain how, instead of memorizing three formulas, one can remember one formula for price variance and one formula for quantity variance, and apply them to direct materials, direct labor, and variable manufacturing overhead.

**Please do not copy answer from another similar question**

Answer 1

	Actual Element	Middle Element	Standard Element
Direct Materials	Actual Quantitiy x Actual Price	Actual Quantity x Standard Price	Standard Quantity x Standard Price
Direct Labour	Actual Hours x Actual Rate	Actual Hours x Standard Rate	Standard Hours x Standard Rate
Variable Manufacturing Overhead	Actual Hours x Actual Rate	Actual Hours x Standard Rate	Standard Hours x Standard Rate
	Actual Quantity/Hours x Actual Price/Rate	Actual Quantity/Hours x Standard Price/Rate	Standard Quantity/Hours x Standard Price/Rate
	AQ x AP	AQ x SP	SQ x SP

So, as you can see we have used AQ in the place of Actual Quantity/Hours.

And AP at the place of Actual Price/Rate.

Formulas:

Price Variance = (AQ x AP) - (AQ x SP)

Quantity Variance = (AQ x SP) - (SQ x SP)

(Note: You just have to replace the Q with H and P with R in case of direct labor and variable manufacturing overhead for the sake of remembering)