Page 12 - PowerPoint Presentation
P. 12
STANDARD COSTING
Reasons For Variances
• Note: There is a difference between how a variance arose
and why it arose.
• If we have a favourable material price variance:
• How did it arise? Because the actual price paid was
less than the standard.
• Why did it arise? Because lower quality material was
purchased.
• You will not get marks for simply stating that the actual
price was less than the standard price.
• For discussion purposes do not forget to consider the
interdependence between variances (i.e. how one variance
can be explained by another).
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