# Cost Variances

In SU7 we
considered *Budget* variances, now we are going to look at * Cost *variances*.*

A variance can be defined as:

“the difference between the actual cost and the*standard cost*”.

If the *actual cost is less* than the standard cost then
the variance is said to be ‘

*favourable*’ (+).

If the *actual cost is greater* than the standard cost
then the variance is said to be ‘

*adverse*’ (-).

Now, if we continue with the standard costs we defined on the preceding
page, namely *material, labour and overheads*, we can look at the
relevant variances and how they are calculated.