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Hi John!
1.I have actually watched your lectures concerning planning and operational variance but still has some issue with planning variance only.
What’s the objective/purpose/use of the planning variance? The figure obtained, what does it represent?
2. Will there be question in the exam on calculating a revised budget?
3. I’ve noted that in the syllabus planning and operational variance also includes sales; however it’s not in your notes. Should I assumed that that the probability for it to be asked in the exam is minimal?
Thanks.
1. The object of examining the planning variance is to see the effect on the profit of changes of plans since the budget was prepared. For example, we may deliberately have decided to pay more for better materials in order to have less wastage. If the net result was favourable this was a good idea. If the net result was adverse then it turned out to have been a bad idea.
This is separate from (for example) the relevant manager over-paying for materials in error – this would be an operational variance.2. I don’t know what will be in the exam, but it is unlikely (there has never been a question in the past asking for the preparation of a revised budget).
3. It is less likely, but was asked once (market share and market size variances).
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