Overview Of Quantity Variances
Quantity variance is the difference between the actual use of any material and its expected usage. For example in any firm it was expected that "X" quantity of material would be required but in actual the usage turns out to be "Y"; then that variance is termed as quantity variance. The quantity variance is directly used for the raw materials but it can be used for any other equipment of a company be it; number of hours machine is used or so on. It cannot be ruled out that the quantity variance is a relatively arbitrary number; the reason being that the figure of expected usage which we set as a baseline, is derived from bill of materials for a product. The bill of materials is actually the record of raw materials, supplies which are used to construct a product. The bill of materials is based on the engineering estimate of quantity needed and also it considers the certain amount of scrap or spoilage of material. Hence there are many possibilities that the baseline is not calculated properly. If thus is the case that baseline is incorrect then of course the figure if quantity variance will be impacted. This is the reason that even if the quantity variance is either a positive or negative figure, it is always advisable to first check the baseline.
The Quantity variance is an important factor which company considers in calculating its budget. However there are number of things which needs to be checked upon if the quantity variance turns out be unfavorable. If the material which was bought for production was not good for production, then this is a fault of purchasing department and it will make the quantity variance unfavorable as maximum quantity would be scrapped. The other case is that raw material is good but the machines are not set properly or the staff is not trained properly, resulting in wastage of raw material then also the quantity variance would be impacted. Hence the quantity variance depends upon multiple factors. So it has to be studied well in case it turns out to be unfavorable.
The quantity variance can be understood well with an example, suppose a company uses the iron for manufacturing. It was estimated that only 4200 pounds of iron would be used to make an item but the company ends up in using more that is 5000 pounds. The standard price of iron was set up as $20.Since the quantity variance is 800 pounds the value of it turns out be $16000.The company will now use this figure in understanding the reasons or shortcomings for such kind of figure. Similarly if the quantity used is less as compared to the estimated quantity then there is a matter for the company to rejoice as the quantity variance turns out be favorable figure. But gain it is need to mentioned that the figure of estimated quantity ha to be derived properly then only the quantity variance figure will be useful.
Difficulties Encountered In Quantity Variances
The accounting problems itself troubles the students a lot, as it involves the complex problems. In quantity variances problems, the student gets stuck up as the problems are made complex. It is expected from the students that they break the complicated problems into the subparts and come with the solution. This is in fact a tough task for the students. The as simple as the definition of quantity variance, the tougher is to solve its questions. The problems of quantity variance also involved computation of the other variances. The students have to consider the many factors while coming up the solution. The concept if quantity variance should be clear in mind of the student along with the factors that impact, it so that they know how the result can be affected, it is also very important for the student to understand the concept in details to study the further variances and their impact.
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