What is cost variance



The absolute, i.e. without a sign, differences between the individual characteristic values ​​and a position measure in a sample or a group. These deviations characterize the spread of characteristic values ​​in a sample or a totality and lead to measures of spread.

Cost accounting

1. Characterization: Difference between actual and planned cost values ​​(cost variances). Deviations are determined to control corporate decisions and their implementation. Although this requires a not inconsiderable effort, deviations must be constantly determined and the types of deviation always be the subject of economic considerations.

In budget cost accounting, deviations are calculated when determining the influence of the cost-determining factors to control profitability.

2. Shapes / partial deviations: a) Deviations before the cost type calculation:
(1) Price deviations: Difference between the material quantities valued at actual prices and the material quantities valued at transfer prices. Recording when materials are received or used either in financial accounting or in operational accounting.
(2) Wage rate deviations: Difference between the working times evaluated at effective wage rates and planned wage rates.

b) Individual cost deviations:
(1) Individual material consumption deviations: Difference between the actual direct material costs of a cost center and the planned direct material costs. To be determined for each type of material. Causes: unplanned product design, unplanned material properties, mixing deviations and fluctuations in internal profitability.
(2) Working time or performance deviations: See d) (5).

c) Deviations in cost center accounting:
(1) Employment deviations: Only occurs in the full plan cost calculation. Difference between target overheads of the actual reference value and the calculated planned overhead costs of the actual reference value. The employment deviations are the fixed costs charged to the cost units too little in the case of underemployment and too much in the case of overemployment. Therefore, they do not represent a real cost deviation, but only an offset (calculation error due to the fixed cost proportionalization carried out) between cost center accounting and cost accounting. The marginal cost accounting shows no employment deviation (idle cost analysis).
(2) Consumption deviations (quantity deviations): Difference between actual overheads and target overheads of the actual reference values ​​to be recorded in each cost center by cost element. In the plan cost calculation, the profitability deviation i.e.S.

d) Deviations between cost centers and cost objects:
(1) Process deviations (workflow deviations): Difference between the costs of an operation of the actual process and the planned process. Since the cost units are always charged with the planned overhead costs that correspond to the planned, usually optimal process, there is inevitably a discrepancy between the cost center and cost unit accounting when the procedure is changed. It is made up of: cost rate variance and manufacturing time variance.
(2) Series size deviations: Deviations as a result of unscheduled series sizes if two reference values ​​(set-up hours, production hours) are used in the cost center. In the standard cost estimate, the cost object costing is based on a planned setup time ratio (ratio of planned setup hours to the planned production time). However, the planned overhead costs corresponding to the effective series sizes (actual set-up time ratio) are well brought to the cost centers. The resulting deviation is referred to as the series size deviation and represents the set-up time deviation that has occurred evaluated using the planned overhead cost allocation rate for the set-up hour.
(3) Offsetting variances: If procedural and / or capacity-related changes are made in a cost center during the planning period, the planned overhead cost allocation rates to be offset will differ, which would mean that the standard costing of all cost objects processed in this cost center would have to be changed. Because of the change costs, this correction is usually only made in the next planning period. The difference between cost center and cost unit accounting is known as the offset.
(4) Intensity deviations: Difference between target overheads for actual intensity and target overheads for plan intensity.
(5) Working time or performance deviations: The difference between the actual production hours and the planned production hours evaluated using the planned hourly rate.

3. Distribution: The aim is to distribute each type of deviation as precisely as possible among the cost units. With some deviations, this is difficult to do (e.g. employment deviations).

4. Importance: If corresponding costs are planned in the planned cost accounting system for each cost determining factor, a deviation usually arises for each influencing factor when the cost control is carried out. Only if all essential cost-determining factors have previously been isolated as deviations, the last determined “consumption deviation” forms a benchmark for in-house profitability.