A variance is the difference between an actual and a standard cost. Standard costs are recorded in the Work in Process Inventory account, and variances are recorded as either debit (unfavorable) or credit (fa¬ vorable) differences between the standard cost and the actual cost incurred. In general, variances are cal¬ culated as follows for

• direct material:

>- Material Price Variance = (Actual Price X Ac¬ tual Quantity) - (Standard Price X Actual Quantity)

3*- Material Quantity Variance = (Standard Price X Actual Quantity) - (Standard Price X Stan¬ dard Quantity)

>- Total Material Variance = Material Price Vari¬ ance + Material Quantity Variance

• direct labor

>■ Labor Rate Variance = (Actual Price X Ac¬ tual Quantity) - (Standard Price X Actual Quantity)

»- Labor Efficiency Variance = (Standard Price X Actual Quantity) - (Standard Price X Stan¬ dard Quantity)

>- Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance

• variable overhead

»- VOH Spending Variance = Actual VOH — (Standard Price X Actual Quantity)

»- VOH Efficiency Variance = (Standard Price X Actual Quantity) - Applied VOH

>- Total VOH Variance = VOH Spending Vari¬ ance + VOH Efficiency Variance

• fixed overhead

>• FOH Spending Variance = Actual FOH — Budgeted FOH 3- Volume Variance = Budgeted FOH - Ap¬ plied FOH

>- Total FOH Variance = FOH Spending Vari¬ ance + Volume VarianceLO.1