ACCA Specimen CBE F2 Exam – Section B – Question 2

I understand your problem, and I actually think this is a very poor question to ask (and I have told the ACCA), however there is some sense I suppose (which I will explain at the end).

For actually calculating the variance yourself, you can do the workings in several different ways, and I myself prefer the approach in D. When we are doing it ‘by hand’ it should be obvious whether it is favourable or adverse (because we look to see if we have spent less or more than we should have).

The problem is that when it is being done ‘automatically’ on a spreadsheet, the formula needs to be in such a way as the spreadsheet to know whether the answer is favourable or adverse. We would make this happen by instructing it that if the answer is positive – report favourable; if the answer is negative – report adverse.

If you check the formulae, both C and D give an answer of $48,000, but C is + $48,000, whereas D is – $48,000.

That is why C is the correct answer and not D.

So……when you are asked to calculate a variance do it in whichever way you have learned and are happy with.
The problem will only arise if you are tested on spreadsheet formulae, in which case they ae more checking that you can interpret a spreadsheet than understand variances and so I think the best is simply to quickly put the figures into each of the choices and see which gives the right answer (+ or – as well as the actual number).

Hope that helps 🙂

You are very welcome, Barbara.

Best of luck tomorrow (and do let us know how you got on) 🙂