Calculation of production variances to standard cost
The production variance to standard cost for the production flow is calculated by comparing the production flow's quantities of completed products for the period at their standard cost versus the production flow's realized resource usage to WIP over the period at standard cost.
The variances that are calculated for a production flow are calculated by comparing the following information:
The aggregate of a production flow's completed quantities, whose inventory transactions have been financially updated for the period at the detailed standard cost, or according to the standard cost rollup, when no detailed standard cost exists.
The net realized usage over the period, calculated by the aggregate of material quantities whose inventory transactions have been financially updated, at their respective standard cost rollup, and the aggregate of conversion cost that is financially updated, minus the conversion cost transactions that are physically updated for the unused materials.
Variances are produced for each cost group and variance type and recorded when the backflush costing calculation is performed. Variances to standard cost are not booked for manufacturing conversion costs.
A change in the value of a standard cost for a product will revalue the inventory and the WIP, including the production flow's WIP. Any differences between the new standard and the old standard costs are booked as a revaluation variance.