What does a controllable variance mean?

A controllable variance refers to the “rate” portion of a variance. Or, stated another way, the controllable variance is actual expenses minus the budgeted amount of expenses for the standard number of units allowed.

What are the two types of variance?

When effect of variance is concerned, there are two types of variances:

• When actual results are better than expected results given variance is described as favorable variance.
• When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance.

Is it easy to distinguish variance as controllable and uncontrollable?

It is not easy to distinguish variances as controllable or uncontrollable.

What is an example of a controllable budget variance?

The controllable variance contains the fixed and variable overhead variances that can be influenced by management. For example, management might negotiate a discounted price on materials from a vendor because of bulk orders. Negotiated prices lower than the standard prices result in a favorable variable.

What is controllable and uncontrollable cost?

Definition. Controllable cost refers to a cost that can be altered based on a business decision or need. On the other hand, uncontrollable cost refers to a cost that cannot be altered based on a personal business decision or need.

What is Cougar’s controllable overhead variance?

What is Overhead Controllable variance? Overhead Controllable Variance occurs when there is a difference between budgeted overhead expenses and actually incurred overhead expenses. This is also carried out based on the standard output that is produced.

What are the 3 main sales variances?

They are:

• Gross profit variance. This measures the ability of a business to generate a profit from its sales and manufacturing capabilities, including all fixed and variable production costs.
• Contribution margin variance.
• Operating profit variance.
• Net profit variance.

What are key variances?

Variance analysis is a key element of performance management and is the process by which the total difference between flexed standard and actual results is analysed. A number of basic variances can be calculated. If the results are better than expected, the variance is favourable (F).

What is revised quantity?

If the revised standard quantity is more than the actual quantity, the variance will be favorable, and on the other hand, if revised standard quantity is less than the actual quantity, the variance will be unfavorable or adverse.

What is controllable cost example?

The controllable costs are the costs that can be managed and changed in the short-term horizon on the basis of business requirements and needs. Examples of such cost include advertisement cost, direct material cost, donations, compensation etc.

Is salary a controllable cost?

One example is the the manager’s salary. The manager has no control over his own salary and has no power to change or stay within the budget for the salary. Controllable costs are things the executive, manager, or department even can control or change.

When is a controllable variance is unfavorable?

Controllable Variance is said to be favorable where the actual costs that is incurred for a certain product is said to be lesser than the budgeted cost. Similarly, a controllable variance is said to be unfavorable when budgeted costs are lesser than actual costs.

What’s the difference between controllable and uncontrollable costs?

On the other hand, uncontrollable cost refers to a cost that cannot be altered based on a personal business decision or need. While controllable costs can be altered in the short run, uncontrollable costs can be altered in the long run.

What’s the difference between independent variables and uncontrollable variables?

The former is an independent variable that can be manipulated or controlled by the business. The latter are variables that cannot be controlled by a business and need to be adapted to. These variables can appear in a number of different circumstances and sometimes the boundary between controllable and uncontrollable is blurred.

Which is an example of a controllable variable?

For example, choosing the store location is a decision that needs good market research. The shop opener will need to choose the location based on the type of customer that is already found in that location, what competitors are nearby and how the space can best be adapted to suit the retail company.