# SAP B1 Production Order Cost Variance Calculator

> Source: https://netray.co/tools/sap-b1-production-order-cost-variance-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Compare actual to standard on a closed production order and see how much of the variance is material, labor rate and labor efficiency.

## Category

sap

## Erp

SAP Business One

## Industry

Discrete Manufacturing

## Audience

- Cost accountant
- Production manager
- SAP Business One consultant

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Units produced

**Key:** units

**Type:** number

**Default:** 500

**Min:** 0

**Step:** 10

**Unit:** units

#### Standard material cost per unit

**Key:** std_mat

**Type:** number

**Default:** 12.4

**Min:** 0

**Step:** 0.1

**Unit:** $

#### Actual material issued (total)

**Key:** act_mat

**Type:** number

**Default:** 6480

**Min:** 0

**Step:** 10

**Unit:** $

#### Standard labor hours per unit

**Key:** std_hrs

**Type:** number

**Default:** 0.35

**Min:** 0

**Step:** 0.01

**Unit:** hours

#### Actual labor hours

**Key:** act_hrs

**Type:** slider

**Default:** 195

**Min:** 50

**Max:** 400

**Step:** 5

**Unit:** hours

#### Standard labor rate

**Key:** std_rate

**Type:** number

**Default:** 28

**Min:** 0

**Step:** 0.5

**Unit:** $/hour

#### Actual labor rate

**Key:** act_rate

**Type:** number

**Default:** 29.5

**Min:** 0

**Step:** 0.5

**Unit:** $/hour

**Outputs:**

#### Standard cost of output

**Key:** std_total

**Expr:** units * std_mat + units * std_hrs * std_rate

**Format:** currency

#### Actual cost

**Key:** act_total

**Expr:** act_mat + act_hrs * act_rate

**Format:** currency

#### Material variance (positive = unfavourable)

**Key:** mat_var

**Expr:** act_mat - units * std_mat

**Format:** currency

#### Labor efficiency variance

**Key:** eff_var

**Expr:** (act_hrs - units * std_hrs) * std_rate

**Format:** currency

#### Labor rate variance

**Key:** rate_var

**Expr:** (act_rate - std_rate) * act_hrs

**Format:** currency

#### Total variance

**Key:** tot_var

**Expr:** mat_var + eff_var + rate_var

**Format:** currency

**Primary:** true

**Description:** Equals actual cost minus standard cost. Positive means over standard.

#### Variance as percent of standard

**Key:** var_pct

**Expr:** if(gt(std_total,0), tot_var / std_total * 100, 0)

**Format:** percent

**Primary:** true

**Chart:**

#### Total variance versus actual labor hours

**Type:** line

**X:** act_hrs

**From:** 100

**To:** 300

**Steps:** 30

**Series:**

- tot_var
- eff_var

**Disclaimer:** Excludes overhead absorption and scrap by-product credits. Use as a first-pass analysis before posting any adjustments.

## Content

**Intro:** When a production order closes in SAP Business One the difference between what you planned and what you spent is a single number. This tool breaks it into the three causes a production manager can act on: material usage and price, labor efficiency, and labor rate.

**Sections:**

#### How to use it

**Body:** Take the standard cost per unit and standard hours from the item and routing. Take actual material issued, actual hours and the rate from the closed order and your labor cost records. Positive variances are unfavourable and mean you spent more than standard. Move the labor hours slider to see how sensitive the total is to efficiency.

#### The formulas

**Body:** Material variance = actual material - units x standard material. Labor efficiency variance = (actual hours - units x standard hours) x standard rate. Labor rate variance = (actual rate - standard rate) x actual hours. The three add up exactly to actual cost minus standard cost, which is what the tool reports as total variance.

**Bullets:**

- Efficiency uses the standard rate to isolate time effects
- Rate uses actual hours to isolate price effects
- The two labor effects never overlap

#### Reading the result

**Body:** A large material variance points to scrap, substitutions, purchase price changes or inaccurate bill of material quantities. A large efficiency variance points to routing times, setups or downtime. A rate variance usually means overtime or a different crew mix. Match each to the owner who can fix it.

#### Common mistakes

**Body:** Mixing standard and actual rates in the efficiency term, forgetting to compare against the quantity actually completed instead of the planned quantity, and treating small variances as meaningful when the standards are out of date. Refresh standards before chasing noise.

**Cta:** If you want variance reports built from your closed production orders automatically, Netray can help. The calculator is complete without it.

**Faq:**

#### Does this match what SAP Business One reports?

**Answer:** It follows textbook standard costing logic. How your system posts variances depends on the item valuation method and company settings, so use this as an analysis aid and reconcile to the posted journal entries.

#### What does a negative variance mean?

**Answer:** A negative number is favourable because actual cost came in under standard. Check that it is not caused by unreported scrap, missing issues or understated hours before celebrating.

#### Where do I get standard hours per unit?

**Answer:** From your routing or the production times you set in the system. If you do not maintain routings, use a time study average and note it as an assumption.

#### Can I add overhead?

**Answer:** Overhead is not included. If you absorb overhead on labor hours, multiply the efficiency variance by the overhead rate per hour as a separate line to estimate its volume effect.

## Search terms

sap business one production order variance, sap b1 cost variance, production order variance analysis, labor efficiency variance calculator, labor rate variance formula, sap b1 standard cost production, manufacturing variance calculator, sap b1 close production order

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