There are certain variances which may arise under material, labour or overhead due to change in the basic condition on which the standards are established. Revision Variance: This is amount by which a budget is revised but which is not incorporated in the standard cost rate as a matter of policy. The standard costs may be affected by wage rate changes after wage accords, fiscal policy etc. The standard costs are not disturbed to account for these uncontrollable factors and to avoid the amount of labour and cost involved in revision, the basic standard costs are allowed to stand. It is essential to isolate the variance arising out of non-revision in order to analyse the other variances correctly. Method Variance: It is the difference between the standard cost of the product manufactured or operation performed by the normal methods and the cost of operation by alternative method. Standards usually take into account the best method applicable, and any deviation will result in an unfavourable variance. Hence such deviations should be as few as possible. Variance analysis usually proceeds after amending the standards according to the revision variance and the methods of variance Illustration 1 Standard cost of a product in a factory is predetermined as follows: 20 30 Material (5 units @ 34 each) a58 Labour (20 hours @ 21.50 per hour) Overhead expenses Total During a period, 8,000 units were produced whose actual cost was as follows: 10 60 Material (40,500 units @ 25 each) Labour (1,50,000 hours @ 21.60 each) Overhead expenses Total Prepare a statement showing standard cost, actual cost and variances. 2,02,500 2,40,000 90.000 5.32,500