Summary Variances

Summary variances can be calculated for both labor and material. Consider the information shown below:

Direct Material Direct Labor

Planned price/unit $ 30.00 $ 24.30

Actual cost $554,630 $236,200

We can now calculate the total price variance for direct material and the rate cost variance:

• Total price variance for direct material

= Actual units X (BCWP - ACWP) = 17,853 X ($30.00 - $31.07) = $19,102.71 (unfavorable)

• Labor rate cost variance

= Budgeted rate - Actual rate = $24.30 - $26.24 = $1.94 (unfavorable)

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