Question

A variance is the difference between a budgeted, planned, or standard cost and the actual amount
incurred/sold. Variances can be computed for both costs and revenues. Identify and explain the types
of variance analysis tools, which can be used in a production department of a manufacturing company,

which specialises in spare parts for cars

Answer 1

Answer:	Variance analysis is basically the difference between the budgeted and the actual numbers. The sum of all variance gives report of performance of the company for the reporting period.
	The various types of variance are as follows:
	Revenue Variance
	Sales Price Variance: Difference between actual total sales and budgeted total sales for actual units sold.			Sales Volume variance: Difference between budgeted units sold and actual units sold. It can be further divided into Sales mix Variance and Sales Quantity Variance.
	Cost variance can be further explained by the way of following chart:
	Cost Variance
	Cost variance can be divided into Material, labor, Variable overhead, which can be further divided into			And Fixed Overhead can be divided into
	Price/Rate Variance: Difference Between actual and standard prices	Quantity/Efficiency Variance: Difference between actual amount of input used and amount of input allowed.		Budget Variance: Difference between actual and budgeted amounts of fixed overhead cost	Volume Variance: Difference between amount of fixed overhead cost applied and amount of fixed overhead costs originally budgeted.
		Material Quatity variance can be further divided into material mix and Yield Variance			Fixed overhead Volume variance can be further divided into Capacity & Efficiency Variance