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Difference between the amount of labor time that should have been used and the labor that was actually used, multiplied by the standard rate. For example, assume that the standard cost of direct labor per unit of product A is 2.5 hours x $14 = $35. Assume further that during the month of March the company recorded 4500 hours of direct labor time.
Variance analysis can be carried out for both costs and revenues. Variance analysis is usually associated with explaining the difference (or variance) between actual costs and the standard costs allowed for the good output. For example, the difference in materials costs can be divided into a materials price variance and a materials usage variance.
In the direct labor cost we need to have the job time and wage we will pay it to the worker to calculate the direct labor cost as in this formulation: [1] - = Depending on the context, there are various methods to calculate personnel costs, such as on an hourly or daily basis.
Common activity bases used in the calculation include direct labor costs, direct labor hours, or machine hours. This is related to an activity rate which is a similar calculation used in activity-based costing. A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead.
This algorithm can easily be adapted to compute the variance of a finite population: simply divide by n instead of n − 1 on the last line.. Because SumSq and (Sum×Sum)/n can be very similar numbers, cancellation can lead to the precision of the result to be much less than the inherent precision of the floating-point arithmetic used to perform the computation.
In decision theory, economics, and finance, a two-moment decision model is a model that describes or prescribes the process of making decisions in a context in which the decision-maker is faced with random variables whose realizations cannot be known in advance, and in which choices are made based on knowledge of two moments of those random variables.
The Ornstein–Uhlenbeck process is an example of a Gaussian process that has a bounded variance and admits a stationary probability distribution, in contrast to the Wiener process; the difference between the two is in their "drift" term. For the Wiener process the drift term is constant, whereas for the Ornstein–Uhlenbeck process it is ...
In variance analysis (accounting) direct material total variance is the difference between the actual cost of actual number of units produced and its budgeted cost in terms of material. Direct material total variance can be divided into two components: the direct material price variance, the direct material usage variance.