Formulas

09/03/2023 10:55

Valuing Inventory: Average Cost (AVCO)

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒐𝒔𝒕 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚𝟏 ∗ 𝑷𝒓𝒊𝒄𝒆𝟏 + 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚𝟐 ∗ 𝑷𝒓𝒊𝒄𝒆𝟐

=
𝑼𝒏𝒊𝒕 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚𝟏 + 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚𝟐

• Quantity1 = First number of units bought

• Quantity2 = Second number of units bought
• Price1 = First price of units bought
• Price2 = Second price of units bought

Labour Turnover
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑳𝒆𝒂𝒗𝒆𝒓𝒔
𝑳𝒂𝒃𝒐𝒖𝒓 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒆𝒔

Labour Capacity Ratio

𝑨𝒄𝒕𝒖𝒂𝒍 𝑯𝒐𝒖𝒓𝒔 𝑾𝒐𝒓𝒌𝒆𝒅
𝑳𝒂𝒃𝒐𝒖𝒓 𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚 𝑹𝒂𝒕𝒊𝒐 =
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑯𝒐𝒖𝒓𝒔 𝑾𝒐𝒓𝒌𝒆𝒅

Labour Production Volume Ratio

𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕
𝑳𝒂𝒃𝒐𝒖𝒓 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑽𝒐𝒍𝒖𝒎𝒆 𝑹𝒂𝒕𝒊𝒐 =
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑶𝒖𝒕𝒑𝒖𝒕

Labour Efficiency Ratio

𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕
J K
𝑨𝒄𝒕𝒖𝒂𝒍 𝑼𝒏𝒊𝒕 𝑻𝒊𝒎𝒆
𝑳𝒂𝒃𝒐𝒖𝒓 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑹𝒂𝒕𝒊𝒐 =
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑶𝒖𝒕𝒑𝒖𝒕
J𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑼𝒏𝒊𝒕 𝑻𝒊𝒎𝒆K

Labour Ratios
𝑳𝒂𝒃𝒐𝒖𝒓 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑽𝒐𝒍𝒖𝒎𝒆 𝑹𝒂𝒕𝒊𝒐
𝑳𝒂𝒃𝒐𝒖𝒓 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑹𝒂𝒕𝒊𝒐 =
𝑳𝒂𝒃𝒐𝒖𝒓 𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚 𝑹𝒂𝒕𝒊𝒐

𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕

J𝑨𝒄𝒕𝒖𝒂𝒍 𝑼𝒏𝒊𝒕 𝑻𝒊𝒎𝒆K J K
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑶𝒖𝒕𝒑𝒖𝒕
=
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑶𝒖𝒕𝒑𝒖𝒕 𝑨𝒄𝒕𝒖𝒂𝒍 𝑯𝒐𝒖𝒓𝒔 𝑾𝒐𝒓𝒌𝒆𝒅
J𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑼𝒏𝒊𝒕 𝑻𝒊𝒎𝒆K J𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑯𝒐𝒖𝒓𝒔 𝑾𝒐𝒓𝒌𝒆𝒅K

Apportioning Overheads to Costs Centres

𝑨𝒑𝒑𝒐𝒓𝒕𝒊𝒐𝒏𝒆𝒅 𝑩𝒂𝒔𝒊𝒔
𝑨𝒑𝒑𝒐𝒓𝒕𝒊𝒐𝒏𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 = 𝑻𝒐𝒕𝒂𝒍 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 ∗
𝑻𝒐𝒕𝒂𝒍 𝑩𝒂𝒔𝒊𝒔

Absorbing Overheads to Cost Units

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅
𝑶𝑨𝑹 =
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍

𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅
𝑶𝑨𝑹 (𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑨𝒃𝒔𝒐𝒓𝒑𝒕𝒊𝒐𝒏 𝑹𝒂𝒕𝒆) =
𝑨𝒃𝒔𝒐𝒓𝒑𝒕𝒊𝒐𝒏 𝑩𝒂𝒔𝒊𝒔

Under-Absorption & Over-Absorption

𝑨𝒃𝒔𝒐𝒓𝒃𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 = 𝑶𝑨𝑹 ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍
𝑨𝒃𝒔𝒐𝒓𝒃𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 − 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅

Prime Cost
𝑷𝒓𝒊𝒎𝒆 𝑪𝒐𝒔𝒕 𝑫𝒊𝒓𝒆𝒄𝒕 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑪𝒐𝒔𝒕 𝑫𝒊𝒓𝒆𝒄𝒕 𝑳𝒂𝒃𝒐𝒖𝒓 𝑪𝒐𝒔𝒕
= +
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Marginal Cost
𝑴𝒂𝒓𝒈𝒊𝒏𝒂𝒍 𝑪𝒐𝒔𝒕 = 𝑷𝒓𝒊𝒎𝒆 𝑪𝒐𝒔𝒕 + 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅𝒔

Marginal Production Cost

𝑴𝒂𝒓𝒈𝒊𝒏𝒂𝒍 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑪𝒐𝒔𝒕 𝑷𝒓𝒊𝒎𝒆 𝑪𝒐𝒔𝒕 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅𝒔
= +
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Absorption Production Cost

𝑨𝒃𝒔𝒐𝒓𝒑𝒕𝒊𝒐𝒏 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑪𝒐𝒔𝒕 𝑴𝒂𝒓𝒈𝒊𝒏𝒂𝒍 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑪𝒐𝒔𝒕 𝑭𝒊𝒙𝒆𝒅 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅𝒔
= +
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Contribution
𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 𝑴𝒂𝒓𝒈𝒊𝒏𝒂𝒍 𝑪𝒐𝒔𝒕
= −
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Inventory Valuation: Marginal Costing

𝑭𝒊𝒏𝒊𝒔𝒉𝒆𝒅 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑽𝒂𝒍𝒖𝒆 𝑴𝒂𝒓𝒈𝒊𝒏𝒂𝒍 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑪𝒐𝒔𝒕
=
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Inventory Valuation: Absorption Costing

𝑭𝒊𝒏𝒊𝒔𝒉𝒆𝒅 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑽𝒂𝒍𝒖𝒆 𝑨𝒃𝒔𝒐𝒓𝒑𝒕𝒊𝒐𝒏 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑪𝒐𝒔𝒕
=
𝑼𝒏𝒊𝒕 𝑼𝒏𝒊𝒕

Gross Profit
𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕 = 𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 − 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔

Net Operating Profit (EBIT)

𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 = 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕 − Non-production 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅𝒔
(𝒆𝒙𝒄𝒍𝒖𝒅𝒊𝒏𝒈 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝒕𝒂𝒙)

Net Profit Before Tax (PBT or EBT)

𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑩𝒆𝒇𝒐𝒓𝒆 𝑻𝒂𝒙 = 𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 − 𝑭𝒊𝒏𝒂𝒏𝒄𝒆 𝑪𝒐𝒔𝒕𝒔

Net Profit After Tax (PAT or EAT)

𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑨𝒇𝒕𝒆𝒓 𝑻𝒂𝒙 = 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑩𝒆𝒇𝒐𝒓𝒆 𝑻𝒂𝒙 − 𝑻𝒂𝒙 𝑪𝒐𝒔𝒕𝒔

The Budgeted Statement of Financial Position

𝑬𝒒𝒖𝒊𝒕𝒚 = 𝑨𝒔𝒔𝒆𝒕𝒔 − 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑨𝒔𝒔𝒆𝒕𝒔 = 𝑬𝒒𝒖𝒊𝒕𝒚 + 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

𝑵𝒐𝒏𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔 = 𝑬𝒒𝒖𝒊𝒕𝒚 + 𝑵𝒐𝒏𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

+𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔 + 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Equivalent Units (EUs)

An equivalent unit (EU) is an item of work in progress (WIP) that is expressed in % terms of the finished product.

E.g. if a company has 200 units of WIP that are 25% complete, how many equivalent units is this?

𝟐𝟎𝟎 𝒖𝒏𝒊𝒕𝒔 ∗ 𝟐𝟓% = 𝟓𝟎 𝒆𝒒𝒖𝒊𝒗𝒂𝒍𝒆𝒏𝒕 𝒖𝒏𝒊𝒕𝒔 (𝑬𝑼𝒔)

By Products
By products are products that are manufactured at the same time as another product but where the by product has
much lower value than the original intended product.

Net Realisable Value

𝑵𝒆𝒕 𝑹𝒆𝒂𝒍𝒊𝒔𝒂𝒃𝒍𝒆 𝑽𝒂𝒍𝒖𝒆 = 𝑺𝒂𝒍𝒆𝒔 − 𝑨𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝑷𝒓𝒐𝒄𝒆𝒔𝒔𝒊𝒏𝒈 𝑪𝒐𝒔𝒕𝒔

Activity Based Costing (ABC)

𝑷𝒓𝒐𝒅𝒖𝒄𝒕 𝑪𝒐𝒔𝒕 𝑫𝒓𝒊𝒗𝒆𝒓
𝑨𝒃𝒔𝒐𝒓𝒃𝒆𝒅 𝑷𝒓𝒐𝒅𝒖𝒄𝒕 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 = ∗ 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑪𝒐𝒔𝒕
𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 𝑫𝒓𝒊𝒗𝒆𝒓

Target Costing
𝑻𝒂𝒓𝒈𝒆𝒕 𝑪𝒐𝒔𝒕 = 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 − 𝑫𝒆𝒔𝒊𝒓𝒆𝒅 𝑷𝒓𝒐𝒇𝒊𝒕

OR

Target Cost = 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 ∗ (𝟏 − 𝑫𝒆𝒔𝒊𝒓𝒆𝒅 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏)

𝒘𝒉𝒆𝒓𝒆,

𝑫𝒆𝒔𝒊𝒓𝒆𝒅 𝑷𝒓𝒐𝒇𝒊𝒕
𝑫𝒆𝒔𝒊𝒓𝒆𝒅 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆

Sales Variance (Price)

𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆) ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕

Sales Variance (Volume)

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑪𝒐𝒏𝒕𝒓𝒖𝒃𝒊𝒕𝒊𝒐𝒏
𝑺𝒂𝒍𝒆𝒔 𝑽𝒐𝒍𝒖𝒎𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑨𝒎𝒐𝒖𝒏𝒕) ∗
𝑼𝒏𝒊𝒕
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
𝑺𝒂𝒍𝒆𝒔 𝑽𝒐𝒍𝒖𝒎𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑨𝒎𝒐𝒖𝒏𝒕).∗ 𝑼𝒏𝒊𝒕

Material Variance (Price)

𝑨𝒄𝒕𝒖𝒂𝒍 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆 −
𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑷𝒓𝒊𝒄𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = J K ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕
− 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆

Materials Variance (Usage)

𝑨𝒄𝒕𝒖𝒂𝒍 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕 −
𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒔𝒂𝒈𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = J K ∗ 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆
− 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕

Materials Variance (Total)

𝑻𝒐𝒕𝒂𝒍 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑷𝒓𝒊𝒄𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 + 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒔𝒂𝒈𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆

Labour Variance (Rate)

𝑳𝒂𝒃𝒐𝒖𝒓 𝑹𝒂𝒕𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑳𝒂𝒃𝒐𝒖𝒓 𝑹𝒂𝒕𝒆 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑳𝒂𝒃𝒐𝒖𝒓 𝑹𝒂𝒕𝒆) ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑳𝒂𝒃𝒐𝒖𝒓 𝑻𝒊𝒎𝒆

Labour Variance (Efficiency)

𝑳𝒂𝒃𝒐𝒖𝒓 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑳𝒂𝒃𝒐𝒖𝒓 𝑻𝒊𝒎𝒆 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑳𝒂𝒃𝒐𝒖𝒓 𝑻𝒊𝒎𝒆) ∗ 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑳𝒂𝒃𝒐𝒖𝒓 𝑹𝒂𝒕𝒆

Labour Variance (Total)

𝑻𝒐𝒕𝒂𝒍 𝑳𝒂𝒃𝒐𝒖𝒓 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑳𝒂𝒃𝒐𝒖𝒓 𝑹𝒂𝒕𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 + 𝑳𝒂𝒃𝒐𝒖𝒓 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆

Variable Overhead Variance (Expenditure)

𝑨𝒄𝒕𝒖𝒂𝒍 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅
(𝑽𝑶𝑽) 𝑬𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆 = ^ − _ ∗ 𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍
𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍

Variable Overhead Variance (Efficiency)

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅
(𝑽𝑶𝑽) 𝑬𝒇𝒇𝒊𝒄𝒆𝒏𝒄𝒚 = (𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍) ∗
𝑼𝒏𝒊𝒕

Variable Overhead Variance (Total)

𝑻𝒐𝒕𝒂𝒍 𝑽𝑶𝑽 = 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑬𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 + 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆

Fixed Overhead Variance (Expenditure)

𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑬𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑨𝒄𝒕𝒖𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 − 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅

Fixed Overhead Variance (Volume)

𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑽𝒐𝒍𝒖𝒎𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 − 𝑨𝒄𝒕𝒖𝒂𝒍 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍 ∗ 𝑶𝑨𝑹

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅

𝑾𝒉𝒆𝒓𝒆: 𝑶𝑨𝑹 (𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑨𝒃𝒔𝒐𝒓𝒑𝒕𝒊𝒐𝒏 𝑹𝒂𝒕𝒆) =
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑨𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝑳𝒆𝒗𝒆𝒍

Fixed Overhead Variance (Total)

𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 = 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑬𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆 + 𝑭𝒊𝒙𝒆𝒅 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝑽𝒐𝒍𝒖𝒎𝒆 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆

Profitability Ratios: Gross Profit Margin

𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

Profitability Ratios: Net Operating Profit Margin (Return on Sales)

𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

Profitability Ratios: Return on Capital Employed

𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕

𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒅 (𝑹𝑶𝑪𝑬) =
𝑪𝒂𝒑𝒊𝒕𝒂𝒍

𝐖𝐡𝐞𝐫𝐞: 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 = 𝑬𝒒𝒖𝒊𝒕𝒚 + 𝑵𝒐𝒏 − 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Profitability Ratios: Asset Turnover

𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆
𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑪𝒂𝒑𝒊𝒕𝒂𝒍

𝑾𝒉𝒆𝒓𝒆: 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 = 𝑬𝒒𝒖𝒊𝒕𝒚 + 𝑵𝒐𝒏-𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Profitability Ratios
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒅 (𝑹𝑶𝑪𝑬) = 𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 ∗ 𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓

𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

= ∗
𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

Liquidity Ratios: Current Ratio

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Liquidity Ratios: Quick Ratio (Acid Test)

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔 − 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
𝑸𝒖𝒊𝒄𝒌 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Activity Ratios: Inventory Days

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑫𝒂𝒚𝒔 = ∗ 𝟑𝟔𝟓𝒅𝒂𝒚𝒔
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔

Activity Ratios: Receivable Days

𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝑫𝒂𝒚𝒔 = ∗ 𝟑𝟔𝟓𝒅𝒂𝒚𝒔
𝑺𝒂𝒍𝒆𝒔 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

Activity Ratios: Payable Days

𝑷𝒂𝒚𝒂𝒃𝒍𝒆𝒔
𝑷𝒂𝒚𝒂𝒃𝒍𝒆 𝑫𝒂𝒚𝒔 = ∗ 𝟑𝟔𝟓𝒅𝒂𝒚𝒔
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔

Risk Ratios: Gearing

𝑫𝒆𝒃𝒕 𝑵𝒐𝒏7𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑮𝒆𝒂𝒓𝒊𝒏𝒈 g𝑬𝒒𝒖𝒊𝒕𝒚h = 𝑬𝒒𝒖𝒊𝒕𝒚

or

𝑫𝒆𝒃𝒕 𝑵𝒐𝒏 − 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

𝑮𝒆𝒂𝒓𝒊𝒏𝒈 ^ _=
𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

Risk Ratios: Interest Cover

𝑵𝒆𝒕 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑪𝒐𝒗𝒆𝒓 =
𝑭𝒊𝒏𝒂𝒏𝒄𝒆 𝑪𝒐𝒔𝒕

Sales Budget
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑺𝒂𝒍𝒆𝒔 = 𝑼𝒏𝒊𝒕 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 ∗ 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑺𝒂𝒍𝒆𝒔 𝑽𝒐𝒍𝒖𝒎𝒆

Production Budget
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 = 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑺𝒂𝒍𝒆𝒔 𝑼𝒏𝒊𝒕𝒔 − 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

(Raw/Direct) Material Usage Budget

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍𝒔 𝑼𝒏𝒊𝒕 𝑷𝒓𝒊𝒄𝒆
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒔𝒂𝒈𝒆 = ∗ 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍𝒔 𝑽𝒐𝒍𝒖𝒎𝒆
𝑸𝒖𝒂𝒏𝒕

(Raw/Direct) Material Purchases Budget

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔 = 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝑼𝒔𝒂𝒈𝒆 − 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

Labour Budget
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑳𝒂𝒃𝒐𝒖𝒓 𝑪𝒐𝒔𝒕
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑳𝒂𝒃𝒐𝒖𝒓 = 𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑻𝒊𝒎𝒆 ∗
𝑼𝒏𝒊𝒕 𝑻𝒊𝒎𝒆

Production Overhead Budget

4ℎ𝑜𝑢𝑟𝑠 47,000
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝑴𝒂𝒄𝒉𝒊𝒏𝒆 𝑯𝒐𝒖𝒓𝒔 = ∗ = 188,000ℎ𝑜𝑢𝑟𝑠
𝑢𝑛𝑖𝑡 𝑢𝑛𝑖𝑡𝑠

£0.75 £0.25
𝑩𝒖𝒅𝒈𝒆𝒕 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 = ^ + _ . 188,000ℎ𝑜𝑢𝑟𝑠 = £188,000
ℎ𝑜𝑢𝑟 ℎ𝑜𝑢𝑟

Discounting

𝑭𝑽
𝑷𝑽 =
(𝟏 + 𝒓)𝒏
Where:

• PV = Present value

• FV = Future value

• r = Interest rate

• n = Number of time periods

Discount Factor

𝟏 7𝒏
𝑫𝑭 = = ( 𝟏 + 𝒓)
(𝟏 + 𝒓)𝒏

Where:

• DF = Discount factor

• r = Interest rate

• n = Number of time periods

Internal Rate of Return

𝑵𝑷𝑽𝑳
𝑰𝑹𝑹 = 𝒓𝑳 + ∗ (𝒓𝑯 − 𝒓𝑳 )
𝑵𝑷𝑽𝑳 − 𝑵𝑷𝑽𝑯

Where:

• IRR = Internal rate of return

• rL = Interest/Discount rate (low)

• rH = Interest/Discount rate (high)

• NPVL = Net present value (at lower interest/discount rate)

NPVH = Net present value (at higher interest/discount rate

Calculating Interest
PV = FV/(1 + r)
𝑭𝑽 = 𝑷𝑽 ∗ (𝟏 + 𝒓)

Where:

• FV = future value

• PV = present value

• r = interest rate

Calculating Interest
𝑭𝑽 = 𝑷𝑽 ∗ (𝟏 + 𝒓 ∗ 𝒕)

6
𝐹𝑉 = £10,000 (1 + 0.02 . . = £10,000 . 1.01 = £10,100
12
3
𝐹𝑉 = £10,000 (1 + 0.02 . . = £10,000 . 1.005 = £10,050
12

Compound Interest
𝑭𝑽 = 𝑷𝑽 ∗ (𝟏 + 𝒓)𝒏
• Compounding is the process of repeating the calculation of interest over more than one time period.

• For 1 time periods the formula is: 𝑭𝑽 = 𝑷𝑽(𝟏 + 𝒓) > PV(1+r)^1

• For 2 time periods the formula is: 𝑭𝑽 = 𝑷𝑽(𝟏 + 𝒓)(𝟏 + 𝒓) > PV(1+r)^2

• For 3 time periods the formula is: 𝑭𝑽 = 𝑷𝑽(𝟏 + 𝒓)(𝟏 + 𝒓)(𝟏 + 𝒓) > 𝑷𝑽(𝟏 + 𝒓)^𝟑

• For n time periods the formula is: 𝑭𝑽 = 𝑷𝑽(𝟏 + 𝒓)(𝟏 + 𝒓)(𝟏 + 𝒓)(𝟏 + 𝒓) … > PV(1+r)^n

Nominal Interest vs Effective Interest

𝒏
𝒊
𝒓 = ^𝟏 + _ − 𝟏
𝒏

Where:

• r = effective interest rate

• i = nominal interest rate

• n = number of time periods

Return on Investment (ROI)

𝑵𝒆𝒕/𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 (𝑹𝑶𝑰) =
𝑪𝒂𝒑𝒊𝒕𝒂𝒍

Residual Income (RI)

𝑹𝒆𝒔𝒊𝒅𝒖𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 (𝑹𝑰) = 𝑵𝒆𝒕/𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕 − 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 ∗ 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

High/Low Method
𝚫𝒄𝒐𝒔𝒕 𝒉𝒊𝒈𝒉 𝒄𝒐𝒔𝒕 − 𝒍𝒐𝒘 𝒄𝒐𝒔𝒕
𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕 (𝒑𝒆𝒓 𝒖𝒏𝒊𝒕) = =
𝚫𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒉𝒊𝒈𝒉 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 − 𝒍𝒐𝒘 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏

𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕
𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 = 𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 − 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 ∗
𝑼𝒏𝒊𝒕

𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕
𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 = 𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 + 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 ∗
𝑼𝒏𝒊𝒕

Average (Mean)

𝜮𝒙
{=
𝒙
𝒏

K = mean
𝒙
𝜮𝒙 = sum of the values of 𝒙
𝒏 = number of values of 𝒙

Variance
( )𝟐
$ (𝒙 − 𝒙
𝝈𝟐 =
𝒏

𝝈𝟐 = variance
K = mean
𝒙
K)𝟐 = sum of the values of(𝒙 − 𝒙
𝜮 (𝒙 − 𝒙 K )𝟐
𝒏 = number of values of 𝒙

Standard Deviation

{ )𝟐
€ (𝒙 − 𝒙
𝝈 = ~𝝈𝟐 = •
𝒏

𝝈 = standard deviation
K = mean
𝒙
K)𝟐 = sum of the values of(𝒙 − 𝒙
𝜮 (𝒙 − 𝒙 K )𝟐
𝒏 = number of values of 𝒙