1-Compute the material price variance (MPV).
MPV = AQ (AP-SP) or Material Price Variance = Actual Quantity (Actual Price - Standard Price)
2-Provide the entry for the price variance.
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Beginning Inventory Steel
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Material Price Variance
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Accounts Payable
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Labor
1-Compute the labor rate variance (LRV).
LRV= AH (AR-SR) or Labor Rate Variance = Actual Quantity of Hours (Actual Rate Per Hour - Standard Rate Per Hour)
2-Compute the labor efficiency variance (LEV).
LEV = SR (AH-SH) or Labor Efficiency Variance = Standard Labor Rate (Actual Labor Hours Used - Standard Hours)
3-Provide the accounting entry for the labor rate and efficiency variances.
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Work in Process
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Labor Efficiency Variance
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Labor Rate Variance
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Wages Payable
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Overhead
1-Compute the variable overhead rate variance (VRV)
VRV = AH (AR-SR) or Variable Overhead Rate Variance = Actual Quantity Per Hour (Actual Rate - Standard Rate)
2-Compute the variable overhead efficiency variance (VOEV).
VOEV = SR (AH-SH ) or Variable Overhead Efficiency Variance = Standard Rate (Actual Hours Used - Standard Hours)
3-Provide the accounting entry for the overhead rate and efficiency variances.
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Work in Process
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Variable Overhead Efficiency Variance
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Variable Rate Variance
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Accounts Payable
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