Production Variances

There are eight categories of production variances:

Input variances

  • Input price variance – occurs due to changes in the price of materials, hours of work or energy from the moment of posting to the order in relation to the value which was at the time of calculation (Cost estimate).
  • Input quantity variance – happens with posting material quantities (or the number of hours spent) different from the normative amounts.
  • Resource usage variance – caused by using the material (or resource) that were not specified in BOM or Master Recipe.
  • Remaining input variance – all other input variances, for example variances caused by overhead postings.

Output variances

  • Lot size variance – occurs if PP order with non-linear quantity factor, lot size is different from the standard cost estimate lot size (example: setup time does not usually change with lot size, so a different lot size will either increase or decrease the unit cost. It means, whenever a portion of PP order cost does not change with output quantity, lot size variance can occur.
  • Output price variance - occurs if the standard price is changed after delivery to warehouse and before variance calculation.
  • Mixed price variance – occurs in case of using production version mix (several production versions) for Cost estimate.