Efficiency variance
Efficiency variance measures the cost of using more or fewer inputs than the standard quantity allowed for actual output. The standard price is held constant, so only the quantity difference registers.
Also known asquantity variance · usage variance
FrameworkStandard costing
See it move
The two-column comparison sets the standard allowed quantity of 6,000 metres at €5 per metre (standard cost €30,000) against the actual quantity used of 6,400 metres, also valued at the standard price of €5 per metre (actual-at-standard cost €32,000). The adverse efficiency variance of €2,000 is calculated as (6,400 − 6,000) × €5, isolating the cost of the 400 extra metres at the standard price so that usage and price effects remain separate. Both sides use the standard price, so price differences play no part in this variance.
The formula
Variables
- Actual quantity of input used
- Standard quantity allowed for actual output = Standard rate per unit × Actual output
- Standard price per unit of input (€ per unit)
Adverse when AQ > SQ (more input used than allowed); favourable when AQ < SQ