Are there other kinds of variances?


For a short answer, no. Everything else comes down to volume, resource usage, and resource price variances.

For a long answer: other variances differ in name only. The reasons you will find many other names mainly pertain to either specification to clearly identify the origin of the variance (e.g. material usage variance and labor usage variance instead of resource usage variance, which is more generic) or synonyms (e.g. labor usage variance and labor efficiency variance).

First, there are many kinds of volumes of activity and many kinds of resources for which variances may be computed. This naturally results in a multiplication of names identifying either the volume of activity used as reference of the precise nature of the resource which is used and priced.

Second, since management accounting is not codified, the same variances can have different names depending on where you work. For instance, the material usage variance is sometimes called materials quantity variance. As for price variances, the term rate is often used instead of price.

Some textbooks mention the possibility to compute a (resource) mix variance when different resources going into a product are substitutes to each other. Cost may then differ because the product uses different proportions of each component, leading to 1) a resource yield variance, which captures the change in cost due to a change in overall resource usage, and 2) a resource mix variance which captures changes in cost due to the substitution of one resource to another (assuming these resources have different prices). However, this is an unnecessary and misleading complication: resource usage variances capture these effects; moreover, it can be argued that a change in composition is a change in product (think about chocolate with different percentages of cocoa).

I will not discuss overhead variances either: as long as cost pools are homogeneous, the same formulas apply. More generally, as long as there is an output to express a volume of activity or cost driver (whichever it may be), a usage of resources per unit of output (whatever the kind of resource or the kind of output), and a price for these resources, you can compute volume variances, usage variances, and price variances. And if cost pools are not homogeneous, variance computations are meaningless.


Please indicate how clear and understandable this page was for you: