Overview
Variance calculation provides the difference between actual and standard costs.
This process covers the analysis of price variances that emerge during the manufacturing process. It includes the analysis of total variance, variance by factors, and planning variance.
The process identifies and analyzes instances with a difference between standard and actual material prices and material consumption.
Since variances often show how effective you run the purchasing and production processes, it is important to investigate reasons and factors to take the necessary measures against rising material costs, unfavorable material usage, and wastage.
As a result of the process, product price variances will be found and analyzed.
Conduct variance analysis flowchart
How to identify cost variances
Production costs by production lots
Paths
| Path | Manufacturing → Manufacturing reports → Cost analysis → Standard and actual costs of production lots |
|---|---|
| In-app link EN code |
e1cib/data/Catalog.ReportsOptions?ref=89db0050569f7a5511eda3bd4232d544
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| In-app link RU code |
e1cib/data/Справочник.ВариантыОтчетов?ref=811c60a44ccf99dc11eccd5ce40cc494
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1. Go to Manufacturing, click Manufacturing reports, and then open the Standard and actual costs of production lots report under Cost analysis.
2. Set a period, select a company, and click Generate.
3. Analyze the difference between standard and actual values and the quantity of purchased materials and works consumed by production lots.
4. Review the Variance columns.
Production costs by products
Paths
| Path | Manufacturing → Manufacturing reports → Cost analysis → Standard and actual product cost |
|---|---|
| In-app link EN code |
e1cib/data/Catalog.ReportsOptions?ref=89db0050569f7a5511eda3bd48296de5
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| In-app link RU code |
e1cib/data/Справочник.ВариантыОтчетов?ref=b1390050568b35ac11e75a58c6a4d22f
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1. Go to Manufacturing, click Manufacturing reports, and then open the Standard and actual product cost report under Cost analysis.
2. Set a period, select a company, and click Generate.
3. Analyze the difference between standard and actual values and the quantity of purchased materials and works consumed by finished products.
4. Review the Variance columns and analyze the largest amounts.
Production overheads by shopfloors
Paths
| Path | Manufacturing → Manufacturing reports → Cost analysis → Standard and actual production overheads |
|---|---|
| In-app link EN code |
e1cib/data/Catalog.ReportsOptions?ref=89db0050569f7a5511eda3bd4232d545
|
| In-app link RU code |
e1cib/data/Справочник.ВариантыОтчетов?ref=b1390050568b35ac11e75a58c6a4d21a
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1. Go to Manufacturing, click Manufacturing reports, and then open the Standard and actual production overheads report under Cost analysis.
2. Set a period, select a company, and click Generate.
3. Analyze the difference between standard and actual expenses of overheads allocated by business units (shopfloors).
4. Review the Variance columns.
How to investigate cost variance factors
Price and material mix factors
1. Open the reports mentioned above.
2. Find the Material and Labor costs columns.
3. Analyze how the price and the material consumption affect the total deviation.
Compare BOM versions
1. Drill down to the production stage and find the applied Bill of materials.
2. Drill down to the Product standard cost and find the applied Bill of materials.
3. Open it, click Compare BOMs, select the first Bill of materials, and click Generate report.
4. Analyze how this factor affects the total deviation.
Material requirement notes
1. Drill down to the production stage and go to the Supply tab.
2. Review the Additional requirements column to understand the purpose of overconsumption.
3. Review the Cancellation reasons to understand the purpose of underconsumption.
4. Analyze the reasons for material consumption deviation.