Standard Costing and Variance Analysis — Practice

Question 1

Standard cost for one unit of output is 5 kg of material at Rs.20 per kg. Actual output was 800 units, actual material used was 4,300 kg at Rs.22 per kg. Compute Material Cost Variance, Material Price Variance and Material Usage Variance, verifying they reconcile.

Accepted Answer

Standard quantity for actual output is 800 units times 5 kg, giving 4,000 kg. Material Cost Variance is standard cost of actual output less actual cost: (4,000 times 20) less (4,300 times 22), that is 80,000 less 94,600, giving a variance of minus 14,600, that is 14,600 Adverse, since actual cost exceeded standard cost. Material Price Variance is (Standard Price less Actual Price) times Actual Quantity: (20 less 22) times 4,300, that is minus 2 times 4,300, giving minus 8,600, that is 8,600 Adverse, reflecting that more was paid per kg than the standard allowed. Material Usage Variance is (Standard Quantity for Actual Output less Actual Quantity) times Standard Price: (4,000 less 4,300) times 20, that is minus 300 times 20, giving minus 6,000, that is 6,000 Adverse, reflecting that more material was used than the standard allowed for the output actually achieved. Checking the reconciliation: MPV plus MUV is minus 8,600 plus minus 6,000, that is minus 14,600, exactly matching the Material Cost Variance of minus 14,600 computed independently, confirming the two sub-variances have been correctly computed and correctly account for the whole of the total variance between them.

Question 2

Standard time for actual output achieved is 2,000 hours at a standard rate of Rs.50 per hour. Workers were paid for 2,200 hours at an actual rate of Rs.48 per hour, of which 150 hours were idle time due to a machine breakdown. Compute Labour Cost Variance, Labour Rate Variance, Idle Time Variance and Labour Efficiency Variance, verifying they reconcile.

Accepted Answer

Actual hours paid are 2,200, and actual hours worked are 2,200 less the 150 idle hours, that is 2,050. Labour Cost Variance is standard cost of actual output less actual cost: (2,000 times 50) less (2,200 times 48), that is 1,00,000 less 1,05,600, giving minus 5,600, that is 5,600 Adverse. Labour Rate Variance uses actual hours paid: (Standard Rate less Actual Rate) times Actual Hours paid, that is (50 less 48) times 2,200, giving 2 times 2,200, that is 4,400 Favourable, since a lower rate than standard was actually paid. Idle Time Variance is idle hours times standard rate, and is always adverse since idle time is by definition unproductive: 150 times 50, giving 7,500 Adverse. Labour Efficiency Variance, using actual hours worked rather than actual hours paid, is (Standard Hours for Actual Output less Actual Hours Worked) times Standard Rate: (2,000 less 2,050) times 50, that is minus 50 times 50, giving 2,500 Adverse, reflecting that even excluding idle time, workers took slightly longer than standard to produce the actual output. Checking the reconciliation: Labour Rate Variance of 4,400 Favourable, plus Idle Time Variance of 7,500 Adverse, plus Labour Efficiency Variance of 2,500 Adverse, gives 4,400 less 7,500 less 2,500, that is minus 5,600, exactly matching the Labour Cost Variance of 5,600 Adverse computed independently, confirming all three sub-variances correctly account for the total.

Question 3

Standard variable overhead rate is Rs.15 per hour. Standard hours for actual output are 3,000 hours. Actual hours worked were 3,150, and actual variable overhead incurred was Rs.49,500. Compute Variable Overhead Cost Variance, Expenditure Variance and Efficiency Variance, verifying they reconcile.

Accepted Answer

Variable Overhead Cost Variance is standard variable overhead for actual output less actual variable overhead incurred: (3,000 times 15) less 49,500, that is 45,000 less 49,500, giving minus 4,500, that is 4,500 Adverse. Variable Overhead Expenditure Variance compares actual overhead against what actual hours worked should have cost at the standard rate: (Standard Rate times Actual Hours) less Actual Overhead, that is (15 times 3,150) less 49,500, that is 47,250 less 49,500, giving minus 2,250, that is 2,250 Adverse, reflecting that variable overhead was incurred at a higher rate per hour than standard, for the hours actually worked. Variable Overhead Efficiency Variance is structurally identical to the labour efficiency variance, valued at the variable overhead rate: (Standard Hours for Actual Output less Actual Hours Worked) times Standard Rate, that is (3,000 less 3,150) times 15, that is minus 150 times 15, giving 2,250 Adverse, reflecting that more hours were worked than the standard allowed for the actual output achieved, and since variable overhead is assumed to move with the same activity base as labour, this inefficiency in hours worked also inflates variable overhead cost. Checking the reconciliation: Expenditure Variance of 2,250 Adverse plus Efficiency Variance of 2,250 Adverse gives 4,500 Adverse, exactly matching the Variable Overhead Cost Variance computed independently.

Question 4

Budgeted fixed overhead is Rs.6,00,000 for budgeted 20,000 hours, giving a standard fixed overhead rate of Rs.30 per hour. Standard hours for actual output are 21,000. Actual hours worked were 20,500, and actual fixed overhead incurred was Rs.6,30,000. Compute the Fixed Overhead Cost Variance, Expenditure Variance, Volume Variance, and split Volume Variance into Efficiency Variance and Capacity Variance, verifying all reconcile.

Accepted Answer

Absorbed fixed overhead is standard hours for actual output multiplied by the standard rate: 21,000 times 30, giving 6,30,000. Fixed Overhead Cost Variance is Absorbed Fixed Overhead less Actual Fixed Overhead: 6,30,000 less 6,30,000, giving nil, coincidentally zero on these figures despite genuine underlying variances existing within it, which is precisely why the total figure alone is uninformative and the sub-variances must be examined. Fixed Overhead Expenditure Variance compares budgeted overhead against actual overhead, with no reference to activity at all: Budgeted Fixed Overhead less Actual Fixed Overhead, that is 6,00,000 less 6,30,000, giving minus 30,000, that is 30,000 Adverse, reflecting genuine overspending relative to budget regardless of output level. Fixed Overhead Volume Variance is Absorbed Fixed Overhead less Budgeted Fixed Overhead: 6,30,000 less 6,00,000, giving 30,000 Favourable, reflecting that actual output required more standard hours, 21,000, than the 20,000 budgeted, so more overhead was absorbed than was originally budgeted. Checking so far: Expenditure Variance of 30,000 Adverse plus Volume Variance of 30,000 Favourable gives nil, matching the total Fixed Overhead Cost Variance of nil. Now splitting Volume Variance further: Fixed Overhead Efficiency Variance is (Standard Hours for Actual Output less Actual Hours Worked) times Standard Rate, that is (21,000 less 20,500) times 30, that is 500 times 30, giving 15,000 Favourable, reflecting that workers produced the actual output in fewer hours than standard allowed. Fixed Overhead Capacity Variance is (Actual Hours Worked less Budgeted Hours) times Standard Rate, that is (20,500 less 20,000) times 30, that is 500 times 30, giving 15,000 Favourable, reflecting that the plant was actually run for 500 more hours than budgeted. Checking the final reconciliation: Efficiency Variance of 15,000 Favourable plus Capacity Variance of 15,000 Favourable gives 30,000 Favourable, exactly matching the Volume Variance computed independently, and confirming the whole family of variances reconciles correctly from the bottom up to the total Fixed Overhead Cost Variance of nil.

Question 5

Explain the difference between the managerial question answered by Fixed Overhead Capacity Variance and that answered by Fixed Overhead Efficiency Variance, using the phrase each variance is testing, and give an example of a business situation each variance would flag that the other would not.

Accepted Answer

Fixed Overhead Capacity Variance answers the question: did we actually run the plant for the number of hours we planned to run it, regardless of how productively those hours were used? It is computed as actual hours worked less budgeted hours, valued at the standard fixed overhead rate, and it isolates purely whether the available capacity was utilised to the planned extent, with no reference at all to how much output resulted from the hours that were run. Fixed Overhead Efficiency Variance answers a different question: when the plant was actually run, did it produce output at the rate of output per hour that standard conditions anticipated? It is computed as standard hours for actual output less actual hours worked, valued at the same rate, and it isolates purely the productivity of the hours actually worked, entirely independent of whether those hours matched the budgeted total. An example the Capacity Variance would flag that Efficiency would not: a factory shuts down for two unplanned extra maintenance days beyond what was budgeted, running fewer total hours than planned, but during the hours it does run, workers are exactly as productive as standard anticipated, producing output at precisely the expected rate per hour; here Capacity Variance would show a significant adverse result, reflecting the lost running time, while Efficiency Variance would show nil, since productivity per hour actually run was exactly on standard. Conversely, an example Efficiency would flag that Capacity would not: the factory runs for exactly the budgeted number of hours, no more and no less, but a batch of substandard raw material slows the workforce down, so that output per hour actually run falls well below the standard rate; here Capacity Variance would show nil, since actual hours worked exactly matched budgeted hours, while Efficiency Variance would show a significant adverse result, reflecting the shortfall in output achieved from the hours that were, in fact, fully utilised as planned.

Question 6

A candidate computes Material Usage Variance as (Actual Quantity less Standard Quantity for Actual Output) times Standard Price, obtaining the opposite sign from the correct answer. Identify the error, correct the formula, and demonstrate the words-before-numbers discipline that prevents it.

Accepted Answer

The candidate has reversed the order of subtraction within the Usage Variance formula. The correct formula is (Standard Quantity for Actual Output less Actual Quantity) times Standard Price, not the reverse; the candidate's version computes exactly the negative of the correct variance, which will show a favourable result as adverse and vice versa, a sign error that is invisible from the arithmetic alone since both versions produce a numerically correct magnitude, only with the wrong sign attached. The discipline that prevents this is to write the formula out fully in words before substituting any numbers, every single time, rather than working from a half-remembered symbolic arrangement: for Material Usage Variance, the words are standard quantity for the actual output achieved, minus the actual quantity used, the whole multiplied by the standard price. Written this way, the logic is transparent and self-checking: if less material was actually used than standard allowed for this output, the bracket standard-minus-actual is positive, correctly producing a favourable variance, since using less material than the standard allowed is a good outcome; if more material was used than standard allowed, the bracket is negative, correctly producing an adverse variance. A candidate who writes the words first, and only then substitutes standard quantity and actual quantity into their correct positions in that sentence, essentially cannot make the sign error the candidate here made, because the words themselves encode the correct order and the correct direction of comparison, removing the reliance on remembering an abstract symbolic formula under exam pressure.

Question 7

A standard mix for one batch requires 60 kg of Material A at Rs.10 per kg and 40 kg of Material B at Rs.15 per kg (standard mix ratio 60:40). Actual input for one batch was 55 kg of A and 50 kg of B, at the standard prices. Compute Material Usage Variance and split it into Mix Variance and Yield (Sub-Usage) Variance, ignoring any output shortfall for simplicity (assume actual output matches what this exact standard mix should have produced).

Accepted Answer

Standard quantity for the mix is 100 kg total (60 A plus 40 B) per batch; actual total input is 55 plus 50, that is 105 kg. Material Usage Variance overall, using standard mix proportions applied to actual total quantity as the benchmark for the mix effect, and standard total quantity as the benchmark for the yield effect, is computed in two parts. Mix Variance isolates the effect of using a different proportion of A and B than standard, at the actual total input quantity of 105 kg: standard mix of that 105 kg would be 60% A and 40% B, that is 63 kg of A and 42 kg of B; actual mix used was 55 kg of A and 50 kg of B. For Material A: (Standard mix quantity at actual total, 63, less Actual quantity, 55) times Standard Price of 10, that is 8 times 10, giving 80 Favourable, since less A was used than the standard mix at this total input would suggest. For Material B: (42 less 50) times 15, that is minus 8 times 15, giving 120 Adverse, since more B was used than the standard mix would suggest. Total Mix Variance is 80 Favourable plus 120 Adverse, giving 40 Adverse, reflecting that shifting the mix towards the more expensive Material B relative to standard proportions increased cost. Yield Variance isolates the effect of total input quantity differing from standard, at standard mix proportions and standard prices: (Standard total quantity, 100, less Actual total quantity, 105) times the standard weighted average price per kg of the standard mix, that is (60 times 10 plus 40 times 15) divided by 100, giving a standard weighted average of 10.20 per kg; Yield Variance is minus 5 times 10.20, giving 51 Adverse, reflecting that more total material was used than standard called for. Total Material Usage Variance is Mix Variance plus Yield Variance: 40 Adverse plus 51 Adverse, giving 91 Adverse, reflecting the combined effect of both a suboptimal mix and excess total quantity used.

Question 8

A standard gang for one shift comprises 4 skilled workers at Rs.80 per hour and 6 semi-skilled workers at Rs.50 per hour, each working 8 hours (standard hours: skilled 32, semi-skilled 48, total 80). Actual gang for the shift comprised 3 skilled workers and 7 semi-skilled workers, each working 8 hours (actual hours: skilled 24, semi-skilled 56, total 80), at standard rates. Compute the Labour Mix (Gang) Variance.

Accepted Answer

The total actual hours worked, 80, exactly match total standard hours, so there is no yield effect to isolate here, and the entire labour efficiency variance in this scenario arises purely from a mix effect, using a different proportion of skilled to semi-skilled labour than standard while keeping total hours unchanged. Standard mix proportion is 32 skilled to 48 semi-skilled out of 80 total, that is 40% skilled and 60% semi-skilled; applying this proportion to the actual total of 80 hours gives a standard mix at actual total hours of 32 skilled and 48 semi-skilled, identical to the original standard figures in this case since actual total hours happen to exactly equal standard total hours. Actual hours used were 24 skilled and 56 semi-skilled. For skilled labour: (Standard mix hours at actual total, 32, less Actual hours, 24) times Standard Rate of 80, that is 8 times 80, giving 640 Favourable, since fewer skilled hours, the more expensive category, were used than the standard mix proportion would suggest. For semi-skilled labour: (48 less 56) times 50, that is minus 8 times 50, giving 400 Adverse, since more semi-skilled hours, the cheaper category, were used than the standard mix proportion would suggest. Total Labour Mix Variance is 640 Favourable plus 400 Adverse, giving 240 Favourable, reflecting that the company substituted cheaper semi-skilled labour for more expensive skilled labour relative to the standard gang composition, reducing cost even though total hours worked remained unchanged; this favourable mix variance would need to be assessed against any quality or output implications of using a less skilled gang composition than standard specified, a qualitative consideration alongside the purely computational favourable result.

Question 9

Budgeted fixed overhead is Rs.4,80,000 for budgeted 16,000 hours, giving a standard rate of Rs.30 per hour. Actual hours worked were 17,200. Compute Fixed Overhead Capacity Variance alone, and explain in one sentence what a favourable result here specifically tells management, independent of any efficiency consideration.

Accepted Answer

Fixed Overhead Capacity Variance is (Actual Hours Worked less Budgeted Hours) times the Standard Fixed Overhead Rate: (17,200 less 16,000) times 30, that is 1,200 times 30, giving 36,000 Favourable. A favourable capacity variance here specifically tells management that the plant was actually run for more hours than were budgeted, 1,200 hours more, and nothing beyond that: it says nothing at all about how productively those additional hours, or indeed any of the hours worked, were actually used, since that separate question is answered by the Efficiency Variance rather than by Capacity Variance. Capacity Variance in isolation is purely a statement about utilisation of available time relative to the plan, and a manager seeing this favourable 36,000 result should understand it as good news specifically about how much the plant was run, prompting a follow-up question about whether that additional running time also translated into proportionately additional useful output, which only the Efficiency Variance, computed separately, can answer.

Question 10

A company sets a policy of investigating only variances exceeding 5% of standard cost or Rs.10,000, whichever is lower. Material Usage Variance for the period is Rs.4,200 Adverse against a standard material cost of Rs.60,000. Advise on whether this variance should be investigated, and explain the general reasoning behind having a materiality threshold for variance investigation at all.

Accepted Answer

5% of standard material cost of 60,000 is 3,000, and the policy investigates a variance exceeding the lower of this 5% figure and 10,000; since 3,000 is lower than 10,000, the applicable threshold is 3,000. The actual variance of 4,200 Adverse exceeds this 3,000 threshold, so under the stated policy this variance should be investigated. The general reasoning behind having a materiality threshold at all, rather than investigating every variance regardless of size, is that investigation itself has a real cost in management time and effort, and not every variance is worth that cost: a genuinely small variance is more likely to reflect ordinary, random fluctuation inherent in any real operating process, such as minor day-to-day variation in material yield or labour pace that no amount of investigation can meaningfully explain or correct, whereas a larger variance is more likely to signal a genuine, correctable cause, such as a change in material quality, a training gap, or a process problem, that investigation stands a reasonable chance of actually identifying and addressing. Setting a sensible threshold concentrates management's limited investigative attention on the variances most likely to reward that attention with an actionable finding, rather than spreading that attention thinly across every variance, however trivial, purely because standard costing produces a computed figure for it; the specific threshold chosen, whether expressed as a percentage of standard cost, an absolute rupee amount, or the lower or higher of the two as here, is itself a policy judgement each company sets based on its own scale and tolerance for unexplained variation.

Question 11

Explain the general meaning of a favourable and an adverse variance, and state whether each of the following, taken alone and without further context, should always be treated as unambiguously good or bad news: a favourable material price variance, and a favourable labour efficiency variance achieved by rushing work and increasing rework.

Accepted Answer

A favourable variance means actual cost was less than standard, or actual revenue exceeded standard, indicating a result better than planned on that specific measure; an adverse variance means actual cost exceeded standard, or actual revenue fell short of standard, indicating a result worse than planned on that measure. Neither should be treated as unambiguously good or bad news taken entirely in isolation, without considering what caused it or what other, related variances might be showing at the same time. A favourable material price variance, arising from paying less than the standard price, might reflect genuinely good procurement negotiation, but it might equally reflect having purchased a lower grade or quality of material than standard specifies, which could in turn cause an adverse material usage variance, from more material being needed to produce the same output because the cheaper material performs worse, or adverse quality-related costs elsewhere not captured in the material variances at all; the price saving in that case would be more than offset by problems it created elsewhere. A favourable labour efficiency variance achieved by rushing work and increasing rework is a clear example of a variance that looks good on its own narrow measure while masking a genuinely bad underlying outcome: the workers appear to have completed the standard output in less time than expected, but if this was achieved by cutting corners that produced defective output requiring rework, the true cost to the business, including the rework itself and any resulting customer dissatisfaction, is likely to exceed whatever the favourable efficiency variance alone suggests was saved. The general lesson is that variances should be read together, and alongside qualitative operational context, rather than each in isolation as a simple verdict of good or bad performance.

Question 12

Standard labour rate is Rs.65 per hour, set before an unexpected mid-year wage settlement. Actual hours paid for the period were 3,200, at an actual rate of Rs.72 per hour following the settlement. Compute Labour Rate Variance, and discuss whether this variance should be treated as a genuine performance failure by the production manager.

Accepted Answer

Labour Rate Variance is (Standard Rate less Actual Rate) times Actual Hours paid: (65 less 72) times 3,200, that is minus 7 times 3,200, giving 22,400 Adverse. Whether this should be treated as a genuine performance failure by the production manager depends on the cause of the rate difference, which the raw computation alone does not reveal. Here the facts state the higher actual rate followed an unexpected mid-year wage settlement, meaning the standard rate of 65 was set before this settlement occurred and has simply become outdated by an event, a negotiated wage increase, that is entirely outside the production manager's control or influence; the manager has no power to prevent or reduce the rate actually paid to workers once a wage settlement has been agreed at a higher level in the organisation or through industry-wide negotiation. In this situation the adverse Labour Rate Variance, while a genuine and correctly computed gap between standard and actual, should not be attributed to the production manager's performance at all, and holding the manager accountable for it would violate the controllability principle developed earlier in this paper's introductory chapter: a cost should be attributed to a manager's performance only to the extent that manager can significantly influence it. The correct management response in this situation is typically to revise the standard rate to reflect the new, post-settlement wage level going forward, so that future variance analysis measures genuine efficiency and control against a current, realistic benchmark, rather than continuing to generate a large adverse rate variance every period purely because the standard has become stale.

Question 13

Explain why the Variable Overhead Efficiency Variance is structurally identical to the Labour Efficiency Variance, and what assumption underlies this structural similarity. What would happen to that assumption's validity if a company's variable overhead were driven mainly by machine hours rather than by labour hours?

Accepted Answer

The Variable Overhead Efficiency Variance is computed as (Standard Hours for Actual Output less Actual Hours Worked) times the Standard Variable Overhead Rate, exactly the same form as the Labour Efficiency Variance, which uses the identical hours figures multiplied instead by the standard labour rate. This structural identity exists because variable overhead is conventionally assumed to move in direct proportion to the same activity base used for labour, typically direct labour hours, on the reasoning that variable overhead items such as indirect materials, power for hand tools, and supervision time scaling loosely with the workforce all tend to be incurred roughly in proportion to how much direct labour time is being worked; under this assumption, any efficiency gain or loss in labour hours automatically produces a proportionate efficiency gain or loss in variable overhead, since both are being measured against the same underlying activity driver. If a company's variable overhead were instead driven mainly by machine hours rather than labour hours, for instance in a highly automated department where variable overhead consists largely of power and consumables tied to machine running time rather than to how much direct labour time is applied, this assumption would no longer hold well, and computing the Variable Overhead Efficiency Variance using labour hours as the base would misstate the true relationship between overhead and its actual driver; in that situation the variable overhead rate and its associated efficiency variance should instead be computed using machine hours as the activity base, exactly the same reasoning that governs choosing an appropriate absorption base in the overheads chapter, since the variance analysis is only as meaningful as the underlying assumption about what genuinely drives the cost being analysed.

Question 14

Standard cost per unit: 4 kg material at Rs.25 per kg, and 2 hours labour at Rs.90 per hour. Actual output was 1,200 units. Actual material used was 5,100 kg at Rs.24 per kg. Actual labour was 2,300 hours at Rs.95 per hour. Compute Material Cost Variance with its sub-variances, and Labour Cost Variance with its sub-variances, verifying both reconcile.

Accepted Answer

Standard quantity of material for actual output is 1,200 units times 4 kg, giving 4,800 kg. Material Cost Variance is (4,800 times 25) less (5,100 times 24), that is 1,20,000 less 1,22,400, giving 2,400 Adverse. Material Price Variance is (25 less 24) times 5,100, that is 1 times 5,100, giving 5,100 Favourable. Material Usage Variance is (4,800 less 5,100) times 25, that is minus 300 times 25, giving 7,500 Adverse. Checking: 5,100 Favourable plus 7,500 Adverse gives 2,400 Adverse, matching the Material Cost Variance. Standard hours for actual output are 1,200 units times 2 hours, giving 2,400 hours. Labour Cost Variance is (2,400 times 90) less (2,300 times 95), that is 2,16,000 less 2,18,500, giving 2,500 Adverse. Labour Rate Variance is (90 less 95) times 2,300 actual hours, that is minus 5 times 2,300, giving 11,500 Adverse. Labour Efficiency Variance is (2,400 less 2,300) times 90, that is 100 times 90, giving 9,000 Favourable. Checking: 11,500 Adverse plus 9,000 Favourable gives 2,500 Adverse, matching the Labour Cost Variance. Reading the overall pattern: material shows a favourable price outcome, paying less per kg than standard, but an adverse usage outcome, using more kg than standard allowed, with the usage effect dominating to leave a net adverse cost variance; labour shows an adverse rate outcome, paying more per hour than standard, but a favourable efficiency outcome, taking fewer hours than standard allowed, with the rate effect dominating to leave a net adverse cost variance. A manager reviewing this would want to understand both the cheaper, less-efficiently-used material and the more expensive, more-efficiently-used labour as two separate stories requiring separate investigation, rather than reading only the two net cost variances, since each net figure conceals two opposing underlying effects.

Question 15

A candidate computes Fixed Overhead Expenditure Variance as 12,000 Adverse, Fixed Overhead Efficiency Variance as 8,000 Favourable, and Fixed Overhead Capacity Variance as 15,000 Favourable, but reports the Fixed Overhead Cost Variance as 5,000 Adverse. Verify whether this is internally consistent, and identify the error if not.

Accepted Answer

The three sub-variances given are Expenditure of 12,000 Adverse, Efficiency of 8,000 Favourable, and Capacity of 15,000 Favourable. Since Fixed Overhead Cost Variance must equal Expenditure Variance plus Efficiency Variance plus Capacity Variance, the correct total is 12,000 Adverse plus 8,000 Favourable plus 15,000 Favourable, that is minus 12,000 plus 8,000 plus 15,000, giving plus 11,000, that is 11,000 Favourable. The candidate has reported 5,000 Adverse, which does not match this correctly reconciled figure of 11,000 Favourable at all, so the reported total is internally inconsistent with the three sub-variances given, and an error has been made somewhere, either in one or more of the three sub-variance computations themselves, or in the final summation used to arrive at the reported total. This discrepancy is exactly why the reconciliation check, verifying that sub-variances sum back to the total cost variance, should always be performed as a standard final step on every variance problem: it does not, on its own, reveal which specific sub-variance was miscomputed, but it reliably flags that an error exists somewhere in the set, prompting the candidate to recheck each sub-variance's formula and arithmetic individually rather than submitting an answer that is internally contradictory, which an examiner marking against a scheme will readily notice and penalise even if some of the individual sub-variance figures happen to be correct.

Practice — Standard Costing and Variance Analysis

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