BPP question – SecureNet

John,

Ive been watched the lectures on variances thinking I have a pretty good handle on them and have a question on the securenet question on the bpp revision kit. In the lectures we take the total variance that results from materials (for example) expenditure and usage then we explain each of those variances with one planning and one operational variance. In this question, they throw in a complication by asking for the total planning variance and total operational variances which obviously are not the same totals we calculated. Are the below good rules of thumb:

1) Is it fair to deduce that a total planning variance is calculated by taking the both the revised standard rate and the new rate per unit multiplied by the actual production?

2) When explaining the Planning variance, the expenditure variance is calculated by taking the actual production at the revised standard rate and revised price and comparing it to the actual production at the original standard rate and using the revised usage. – I would have thought one would use the original usage so you can calculate the effect of the rate difference only.

3)Usage variance answer in the book is what I would have expected: the actual prod. x standard usage and actual prod x revised standard usage answer multiplied by the standard rate

4) Total operational variance – similar to what i described above for total planning

5) Operational Expenditure variance takes the actual price of actual materials x the revised standard price of actual materials used

6) Operational Usage variance. The way I calculated this is by taking the actual usage (100,000 x 0.035) minus the revised standard usage (100,000 x 0.042) and multiplying that difference by the standard rate. They multiply it by the revised standard rate and I don’t understand why.

Appreciate your help on this. THis question threw me on a loop. Quite disheartening, especially when you think you got a good handle on a topic 🙁 Thank you!

Rachel