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  1. avatar says

    Hi John,
    in your revision notes variance analysis question, the planning variance you used 55000units x1.9kg=104500kg, I thought the planning variance should use budgeted sales which is 600000/12=50000units rather than actual production 55000units, actual production should be used on operational variance. Please advise, thanks.

    • Avatar of John Moffat says

      You would never use budgeted sales for cost variances – it is only ever production that is relevant.

      Planning and operational variances can be calculated two ways (and the two ways give different answers but both get full marks).
      All of the approved Study Texts (and also an examiners article from several years ago) do it the same way as in our Course Notes and lectures, and use the actual production for both the planning and the operational variances. This is the most sensible way because effectively the budget will have been flexed when sales volume variances are calculated.

      The current examiner has only asked it once (the question was called Truffle) two exams ago, and she did it the alternative way (which is a much less sensible way). However her answer made it clear that the other way would get full marks.
      If you want to see it done the more sensible way, then you will find my recording of the answer from the main F5 page.

  2. avatar says

    Dear sir, I would like to know if the variances in the production cost are broken down into expenditure and usage for Materials, rate of pay, IDLE, and efficiency for Labour and so forth. Are the variances within each cost(ie, Materials, Labour, Var OH) fixed or there could be other variances and if there are, how am I going to identify them?

    Much thanks and cheers to smoking!

    • Avatar of John Moffat says

      I am not sure what you mean by the variances being fixed.
      I think you are meaning is it always the same variances/rules, and the answer is yes as regards basic variances.

      The next chapter goes through the more advanced variances (planning and operational, and mix & yield). If these are required then the question will make it clear.

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