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- This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
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- April 7, 2015 at 4:56 pm #240423
hello, i have a litte problem with this thing,
when we calculate price planning variances should we use the revised quantity or the actual quantity and how about usage operational variances should use standard price or revised standard price?
I get confused on this when i try to answer past year question, no.1(b) december 2009 on Secure Net(SN).
Secure Net (SN) manufacture security cards that restrict access to government owned buildings around the world.
The standard cost for the plastic that goes into making a card is $4 per kg and each card uses 40g of plastic after an
allowance for waste. In November 100,000 cards were produced and sold by SN and this was well above the
budgeted sales of 60,000 cards.
The actual cost of the plastic was $5·25 per kg and the production manager (who is responsible for all buying and
production issues) was asked to explain the increase. He said ‘World oil price increases pushed up plastic prices by
20% compared to our budget and I also decided to use a different supplier who promised better quality and increased
reliability for a slightly higher price. I know we have overspent but not all the increase in plastic prices is my fault’
The actual usage of plastic per card was 35g per card and again the production manager had an explanation. He said
‘The world-wide standard size for security cards increased by 5% due to a change in the card reader technology,
however, our new supplier provided much better quality of plastic and this helped to cut down on the waste.’
SN operates a just in time (JIT) system and hence carries very little inventory.(b) Analyse the above total variances into component parts for planning and operational variances in as much
detail as the information allows.April 8, 2015 at 1:02 am #240465There are two pays of calculating planning and operational variances – they give different answers, but the examiner has made it very clear that either approach will get full marks.
The previous examiner (who asked Securenet) did it one way, but the current examiner does it a different way.
Our free lectures (together with the free lecture notes that go with them) go through the approach that the current examiner uses.
If you are using current edition revision kit then the answers do it the same way as the current examiner. If you are using old editions then the answers do it the alternative way.
However, again, both approaches will get full marks.
April 8, 2015 at 10:58 am #240502Thanks so much sir,
u have thrown away all my worried and confuse on this thing.April 9, 2015 at 4:24 am #240587You are welcome 🙂
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