Knowledge of standard cost and variance analysis is an essential skill to assess and improve the efficiency and effectiveness of many organizations.

While the origins of standard costing are in manufacturing, it can be applied to any situation where there is an expected (standard) amount of materials and or labor, and the actual materials and labor can be identified and compared to the expected. Standard costing is used today in many industries, including distribution, health care and services.

This course explains how standard costs are developed for material, labor, and overhead, and their relationship with the budget. The course then explores contribution margin, how to use contribution margin to develop a flexible budget, and how to adapt the flexible budget for any level of output.

Techniques to analyze the differences between the budgeted and actual levels of sales are explored, followed by in-depth examination of the analysis of standard material and labor versus actual material and labor.

The course ends with a discussion of integrating indirect overhead costs into the standard cost of products and services, and how to assess the utilization of overhead costs based on the actual level of output.

The course content covers Performance Management topics tested in the Certified Management Accountant (CMA) Part 1 examination as outlined by the CMA Part 1 exam content specification outline.

Topics include:

  • Standard Costs
  • Introduction to Variance Analysis
  • Contribution Margin
  • Flexible Budgets
  • Sales Variances
  • Direct Material Variances
  • Direct Labor Variances
  • Overhead Variances

Course Key Concepts: Standard costing, variance analysis, management by exception, contribution margin, static budget, master budget, direct material variances, direct labor variances, overhead variances, sales variances, flexible budgets.

Other Performance Management topics tested in the Certified Management Accountant (CMA) Part 1 Examination courses by Tom Coghlan.
Corporate Performance Management

Learning Objectives
  • Identify a standard cost system and identify the reasons for adopting a standard cost system.
  • Recognize how budget variance reporting is utilized in a management by exception (MBE) environment.
  • Explore and develop an understanding of contribution margin per unit and total contribution margin.
  • Identify and describe the benefits and limitations of measuring performance by comparing actual results to the static or master budget.
  • Explore how to prepare a flexible budget based on actual sales volume and calculate the flexible-budget variance by comparing actual results to the flexible budget.
  • Identify the purpose of sales variance analysis and the role of contribution margin in sales variances.
  • Discover how to develop sales variances.
  • Discover how to develop direct material and direct labor variances.
  • Discover how to develop overhead rates and variances, and the impact of indirect nature of overhead on analysis.
Last updated/reviewed: March 15, 2024
10 Reviews (40 ratings)


Anonymous Author
I didn't know a lot about this topic prior to taking this course. I think its a great introductory course for anyone who is less familiar with these concepts and wants a quick high level crash course.

Anonymous Author
Tough class!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Member's Profile
I wish that the course material was more of a written out pdf instead of just powerpoints. I also thought that the glossary was very much lacking in the number of terms defined.

Anonymous Author
This course will make your head spin if you have not been around standard costing in a while BUT it provides a very methodical and detail explanation of the key concepts needed.

Anonymous Author
This was a great course on standard cost variances. It broke down the variances in bite size pieces and made the overall analysis easy to understand and replicate.

Anonymous Author
It was a back to the text book review of cost accounting, a reminder of how actual practices can deviate from the textbook.

Anonymous Author
A great review of standard costing and variance analysis methods. Useful for any sort of production or service businesses.

Anonymous Author
Good course. Would recommend to others. Instructor is knowledgeable and presents material well.

Anonymous Author
Great refresher. Appreciate being able to break courses down to manageable chunks.

Anonymous Author
good course. appreciate the rigor on the analytics

Course Complexity: Intermediate

No advanced preparation or prerequisites are required for this course. 

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
Introduction And Overview
  Course Overview2:46
  Introduction to Standard Costs and Variance Analysis9:36
  REVIEW QUESTIONS: Standard Costs quiz
  Introduction to Variance Analysis7:30
  REVIEW QUESTIONS: Introduction to Variance Analysisquiz
  Contribution Margin6:06
  Flexible Budgets13:01
  REVIEW QUESTIONS: Flexible Budgetsquiz
  Sales Variances16:51
  REVIEW QUESTIONS: Sales Variancesquiz
  Sales Mix and Quantity Variances17:55
  Direct Material Variances17:32
  REVIEW QUESTIONS: Direct Material Variancesquiz
  Direct Labor Variances10:16
  REVIEW QUESTIONS: Direct Labor Variancesquiz
  Labor Rate and Efficiency Variances20:00
  Labor Mix and Yield Variances12:34
  REVIEW QUESTIONS: Labor Mix and Yield Variancesquiz
  Overhead Absorption9:03
  Variable Overhead Variances6:10
  Fixed Overhead Variances8:08
  REVIEW QUESTIONS: Fixed Overhead Variancesquiz
Continuous Play
  Standard Cost and Variance Analysis 2:37:30
Supporting Material
  Slides: Standard Cost and Variance AnalysisPDF
  Standard Cost and Variance Analysis Glossary/IndexPDF
Review And Test