Definition of Cost Variance
Generally a cost variance is the 游戏电竞线上外围APP v5.2 difference between the actual amount of a cost and its budgeted or planned amount. For example, if a company had actual repairs expense of $950 for May but the budgeted amount was $800, the company had a cost variance of $150. When the actual cost is more than the budgeted amount, the cost variance is said to be unfavorable . When an actual cost is less than the budgeted amount, the cost variance is said to be favorable .
Cost Variances in Standard Costing Systems
Cost variances are a key part of the standard costing system used by some manufacturers. In such a system, the cost variances direct attention to the difference between 1) the standard, predetermined and expected costs of the good output, and 2) the actual manufacturing costs incurred . These cost variances send a signal to management that the company is experiencing actual costs that are different from the company's plan.
Standard costing systems report a minimum of two cost variances for each of the following manufacturing costs:
- Direct materials
- Direct labor
- Manufacturing overhead
