# Variance Analysis Example 3

1. Please sir, I heard you saying that ACCA will never ever ask us to prepare budget or operating statement; Is this statement still valid till date bearing in mind the change in exam structure?

2. says

Sir why did we not include Fixed Overheads Volume Variance in to the operating statement ?

3. says

Dear Sir,
I have another question in this part. When you make operating statement, the original budget profit is 56000, after add sales volume variance 2800, which becomes 58800, equal to flexed profit we got from the previous table. It’s easy to understand, because flexed budget is based on 8400. The sales volume is added 400.
But 16800 is sales price variance, also is sales revenue variance, right?
So my question is: does it make sense to use 58800( flexed profit) -16800( sales revenue variance) =42000? What’s this 42000? I am confused . Hope you can help me! Many thanks to you!:))

4. says

Thank you sir you helped me alot in all the topics of FMA!!!
I am going to give my CBE on 13th of December, and I hope I em going to pass it with flying colors just because of your lectures..
HATS OFF to you !!

5. says

Dear Sir , when you have valued closng inventories…. it was @ standard cost….
there has been an impact on the profit…
y it is the question still going smooth????
is there any logic behind????

• says

@ryanpieblock, In management accounting we always value the inventory at standard cost. The reason is that the management accountant will usually be doing statements monthly and it will be silly to keep valuing the inventory differently just because some months we spent a more than we should have, and some months we spent less than we should have.
This is different than the financial accounts (because in financial accounts inventory will be valued at actual cost) but we are not doing financial accounts.

In practice the standard cost might well be changed during the year, but not for Paper F2.

6. says

Dear Sir,I can’t get why is sales price variance ‘ adverse’ in the above example??

shouldn’t it be favourable…??
because actual sales at actual Selling price ……..\$613200
actual sales at standard selling price………………..\$630000

actual results are lower than expected.Shouldn’t it be favourable because it is saving cost??

• says

@Miss A.., But sales revenue is not a cost – it is income!!!

Lower selling price will mean less profit.

7. says

To make sales budget how do i determine that demand in terms of new business where there is no previous data ?