What it is
Manufacturers that carry inventory at standard cost have to show that the standard approximates actual cost. The support is the variance analysis: price, usage, rate, efficiency and overhead variances by product, and where the net variance lands. This workbook calculates all of it from the standards and actuals.
Enter standards, actual quantities, prices, hours and overhead by product. The Variances tab calculates eight variances, labels each product favorable or unfavorable, and allocates the net variance between ending inventory and cost of goods sold in proportion to the units on hand.
When to use it
- At each close, to explain the variance accounts and the effect on inventory.
- During an audit of inventory valuation, to test whether standards approximate actual cost.
- When setting new standards, to see what last year’s variances imply.
What’s inside
- Inputs tab: 20 products with standards and actuals
- Variances tab: material price and usage, labor rate and efficiency, variable overhead spending and efficiency, fixed overhead spending and volume
- Favorable or unfavorable label, share of production in inventory and the split to inventory and cost of goods sold
- Ties of the allocation and the total to the general ledger variance accounts
Standard cited
This template follows ASC 330. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
What sign convention does the workbook use?
A positive variance is unfavorable, meaning actual cost is above standard. A negative variance is favorable. The Variances tab labels each product so the sign is clear.
When should variances be allocated to inventory?
When the net variance is material in relation to inventory, so that inventory approximates actual cost. Set a threshold on the Inputs tab; below it the workbook sends the whole variance to cost of goods sold. Abnormal waste and idle capacity are expensed.
Which quantity drives the price variance?
The workbook uses the actual quantity used. If purchases and usage differ in the period, compute the price variance on quantity purchased from the purchasing system and enter that quantity.
Related templates
- Manufacturing Inventory and Cost Accounting Audit Checklist
- Lower of Cost or NRV Inventory Test (ASC 330)
- Manufacturing Overhead Absorption and Inventory Costing
- Audit Program: Inventory
Last updated 11/05/2026. All free templates.