Material Mix Variance – meaning and formula

material mix variance meaning and formula

Materials mix variance is that part of material usage variance which arises due to changes in standard and the actual composition of mix. Materials mix variance is the difference between the standard price of the standard mix and the standard price of the actual mix. The standard price is used in calculating this variance. The variance is calculated under two situations: read more

Overhead variance – meaning and formula

OVERHEAD COST VARIANCE - MEANING AND FORMULA

Overhead is the aggregate of indirect material cost, indirect wages (indirect labour cost) and indirect expenses. Thus, overhead costs are indirect costs and are important for the management for the purposes of cost control. read more

absorption costing – meaning

meaning of absorption costing

Absorption costing means that all the manufacturing costs are absorbed by the total units produced. In short, the cost of a finished unit in inventory will include direct materials, direct labor, and both variable and fixed manufacturing overhead. As a result, absorption costing is also referred to as full costing or the full absorption method. Absorption costing is often contrasted with variable costing or direct costing. Under variable or direct costing, the fixed manufacturing overhead costs are not allocated to the products manufactured. Variable costing is often useful for management’s decision-making. However, absorption costing is required for external financial reporting and for income tax reporting. It is also referred to as the full- cost technique read more