# Manufacturing Cost Variance Types Reference > Source: https://netray.co/tools/manufacturing-variance-types-reference > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer A searchable table of purchase, material, labor, overhead and revenue variances with formulas, owners and first checks. ## Category cost-finance ## Industry Discrete Manufacturing ## Audience - Cost accountant - Controller - Operations manager ## Tool **Kind:** worksheet **Mode:** reference **Columns:** #### Variance **Key:** variance **Type:** text #### Group **Key:** group **Type:** text #### Formula **Key:** formula **Type:** text #### Usual owner **Key:** owner **Type:** text #### First thing to check **Key:** check **Type:** text **Rows:** **Variance:** Purchase price variance **Group:** Material **Formula:** (Actual price - Standard price) x Actual quantity purchased **Owner:** Purchasing **Check:** Stale standard cost, freight or tariff changes, wrong UoM on the PO **Variance:** Material usage (quantity) variance **Group:** Material **Formula:** (Actual quantity used - Standard quantity allowed) x Standard price **Owner:** Production **Check:** Scrap, BOM yield assumptions, unreported scrap, backflush errors **Variance:** Material mix variance **Group:** Material **Formula:** (Actual mix quantity - Standard mix quantity) x Standard price **Owner:** Production, engineering **Check:** Substitute materials issued instead of the BOM component **Variance:** Material yield variance **Group:** Material **Formula:** (Actual total input - Standard input for actual output) x Standard average price **Owner:** Production **Check:** Process yield versus routing and BOM assumptions **Variance:** Labor rate variance **Group:** Labor **Formula:** (Actual rate - Standard rate) x Actual hours **Owner:** Production, HR **Check:** Overtime premium, wrong labor grade, rate table out of date **Variance:** Labor efficiency variance **Group:** Labor **Formula:** (Actual hours - Standard hours allowed) x Standard rate **Owner:** Production **Check:** Routing times, setup, rework hours booked to the job **Variance:** Labor mix variance **Group:** Labor **Formula:** (Actual mix hours - Standard mix hours) x Standard rate **Owner:** Production **Check:** Higher skill grade working on lower grade operations **Variance:** Variable overhead spending variance **Group:** Overhead **Formula:** Actual variable overhead - (Actual hours x Standard variable rate) **Owner:** Plant manager **Check:** Supplies, utilities and indirect spend versus budget **Variance:** Variable overhead efficiency variance **Group:** Overhead **Formula:** (Actual hours - Standard hours allowed) x Standard variable rate **Owner:** Production **Check:** Same driver as labor efficiency **Variance:** Fixed overhead spending variance **Group:** Overhead **Formula:** Actual fixed overhead - Budgeted fixed overhead **Owner:** Plant manager, finance **Check:** Rent, depreciation, salaried indirect cost versus budget **Variance:** Fixed overhead volume variance **Group:** Overhead **Formula:** Budgeted fixed overhead - (Standard hours allowed x Fixed rate) **Owner:** Operations, sales **Check:** Output versus the volume used to set the fixed rate **Variance:** Overhead absorption (over or under applied) **Group:** Overhead **Formula:** Overhead applied - Actual overhead incurred **Owner:** Cost accounting **Check:** Overhead rate, absorption base and period cut off **Variance:** Sales price variance **Group:** Revenue **Formula:** (Actual price - Budget price) x Actual units sold **Owner:** Sales **Check:** Discounts, rebates, mix of customers and price list errors **Variance:** Sales volume variance **Group:** Revenue **Formula:** (Actual units - Budget units) x Budget margin per unit **Owner:** Sales, planning **Check:** Forecast bias, lost orders, timing of shipments across periods **Variance:** Sales mix variance **Group:** Revenue **Formula:** (Actual mix units - Budget mix units) x Budget margin per unit **Owner:** Sales **Check:** Shift towards lower or higher margin products **Variance:** Inventory revaluation variance **Group:** Inventory **Formula:** On hand quantity x (New standard cost - Old standard cost) **Owner:** Cost accounting **Check:** Timing of the standard cost roll and open work in process **Variance:** Work in process close variance **Group:** Production order **Formula:** Actual order cost - Standard cost of quantity delivered **Owner:** Cost accounting **Check:** Orders closed with open components or unreported output **Variance:** Scrap variance **Group:** Production order **Formula:** Actual scrap cost - Standard scrap allowance **Owner:** Quality, production **Check:** Scrap reason codes and whether scrap is in the standard **Notes:** Terminology and sign conventions differ by company and ERP. Confirm whether a positive number means favorable or unfavorable in your reports. ## Content **Intro:** Variance analysis only helps when everyone uses the same names and formulas. This table lists the common standard cost and revenue variances, how each is calculated, which team usually owns it and the first thing to check when it moves. **Sections:** #### How to use this table **Body:** Search for the variance your ERP report shows, read the formula, then follow the check column. Use the group filter to see all material or overhead variances together. Export it to Excel and add a column for the matching report or account in your own system. Month end review gets faster once each variance has a named owner. **Bullets:** - Search by group such as Material, Labor or Overhead - Match each row to a GL account in your chart of accounts - Add favorable or unfavorable sign convention in your export #### Price versus quantity **Body:** Almost every cost variance splits into a price part and a quantity part. The price part uses the actual quantity so that the two effects add up to the total with no overlap. Quantity effects are valued at the standard price. If you value quantity at actual price, the total still reconciles but the attribution to buyers and production shifts. #### Reading variances together **Body:** A favorable purchase price variance with an unfavorable usage variance often means cheaper material that scraps more. A favorable labor rate variance with a bad efficiency variance often means lower paid people taking longer. Always read pairs, not single lines, before deciding who to call. #### ERP notes **Body:** Whether purchase price variance is booked at receipt or at invoice, and whether production variances are posted at order close or per transaction, depends on the ERP and its costing configuration. Check your own costing method documentation before reconciling the GL to an operational report. **Cta:** If variance explanations take days each close, Netray can build a read-only view over your ERP that traces each variance to the receipts, orders and transactions behind it. **Faq:** #### Is a positive variance favorable? **Answer:** It depends on the convention. Many cost reports show actual minus standard, so a positive cost variance is unfavorable, while revenue variances use the opposite sign. Always label the sign convention on every report. #### Do I need standard costing to use variances? **Answer:** Variances are most natural with standard costing. With actual or average costing you can still compare actual to a budget or quote, but the price and usage split needs a defined standard to compare against. #### Who should own purchase price variance? **Answer:** Purchasing usually owns it, but only if the standard cost was set with their input. If standards are stale, finance owns the correction. Ownership without a fair standard produces blame instead of action. #### Can I export the table? **Answer:** Yes, the table exports to Excel, CSV and PDF so you can add your own account numbers, owners and thresholds. ## Search terms standard cost variance types, manufacturing variance formulas, ppv usage variance efficiency variance, cost variance analysis reference, variance analysis cheat sheet, material usage variance formula, labor rate variance formula, overhead variance types --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json