Changes

Variance is a term frequently used in Management or Cost Accounting.

'''Variance''' is a term frequently used in Management or [[Cost]] [[Accounting]].

It is used to highlight the differences between standard costs and actual costs.  The variance may be highlighted in units or in dollars.  For example, the standard cost of a product may be 2.5 labor hours, but if the actual time spent was three hours, the product would be said to have an unfavorable variance of 0.5 hours.  If the labor rate was $20.00 per hour, the labor variance would be $10.00

It is used to highlight the differences between standard costs and actual costs.  The variance may be highlighted in units or in [[dollars]].  For example, the standard cost of a product may be 2.5 [[labor]] hours, but if the actual time spent was three hours, the product would be said to have an unfavorable variance of 0.5 hours.  If the labor rate was $20.00 per hour, the labor variance would be $10.00

Now, suppose the actual labor rate was $25.00 per hour, there would be a labor rate variance of ($25.00-$20.00) x 2 hours or $10.00.   

Now, suppose the actual labor rate was $25.00 per hour, there would be a labor rate variance of ($25.00-$20.00) x 2 hours or $10.00.