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can you help me with the planning variance of secure net- question from december 2009
Firstly, you should say what help you need!
Secondly, and importantly, there are two ways of calculating planning and operation variances which give different answers. The examiner always accepts either way (there are arguments for both ways).
If you are using older books then the answer will have been done the way that the previous examiner preferred. However, the new examiner prefers the other method (which is actually easier) and so all the current editions of books use the method she prefers (which is also the method that I use in my free lectures, which I suggest that you watch).
please help me calculate planning variance if this question according to your preference.
I am sorry but no.
As we say throughout this website you should buy a current edition of the Revision Kit from one of the ACCA approved publishers.
If you have done so then they will have answered the question in the same way that I explain in my lectures. If you do not understand what they have done then you must say which bit of their answer you do not understand.
Here’s the answer
(b) The planning variances are calculated by comparing the original budget and the revised standards after adjustment for factors
outside the control of the organisation.
On this basis the revised standards would be a price of $4·80 per kg with revised usage at 42g per card.
Planning price variance = ($4·80 – $4)4,200 = $3,360 Adverse
Planning Usage variance = (4,200 – 4,000)$4 = $800 Adverse
The total planning error (variance) is $4,160 Adverse
The operational variances compare the actual spend with the revised budget figures.
Operational price variance = ($5·25 – $4·80)3,500kg = $1,575 Adverse
Operational usage variance = (3,500 – 4,200)$4·80 = $3,360 Favourable
The total operational variance is $1,785 FavourableI didn’t understand about 42g of the revised usage
The question says that the world-wide standard size of the cards increased by 5%.
Since the original standard was 40g, the revised standard is 40g + (5% x 40g) = 42g.
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