All 38 Variance Analysis questions
More in Variance Analysis
What is variance analysis? What is the difference between a favorable and an adverse variance? What is a standard cost? What is a standard hour and how is it used in efficiency measurement? What is a standard costing system? What does an adverse sales price variance indicate? What is a favorable variance a warning sign of sometimes? What is the difference between a budget and a standard? What are the two components of the direct materials variance? What are the two components of the direct labor variance?
Advertisement
Back to results for “Variance Analysis”
Budgeting & Forecasting › Variance Analysis

What is the total cost variance and how does it relate to the sub-variances?

Beginner

Answer

The total cost variance is the overall difference between the standard/flexed cost for actual output and the actual cost. It equals the sum of the individual cost variances (materials price + usage, labor rate + efficiency, overhead variances). Breaking the total into sub-variances shows which specific elements caused the difference.
Real-world example The total adverse cost variance of $8,000 is explained by adverse usage and rate variances netted against a favorable price.

Common follow-ups: What do the sub-variances sum to? | Why break the total down?

Variance Analysis Flexible Budgets Variance Analysis
All 38 Variance Analysis questions