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Hi John!
-In example 1 in the notes, why for the expenditure variance, you have calculated the actual purchase at standard cost by doing 108900kg x $5?
– My issue about this is that if there was a revised in the standard, then what’s the point of calculating the expenditure variance with something which is out of date/ unrealistic( i.e the $5)
As I explain in my lectures, there are two ways of calculating operational and planning variances that give different answers.
The previous examiner preferred one way (which does what you are suggesting), but the current examiner prefers the other way. The way that the current examiner prefers is therefore the way that I work through it in my lectures – she prefers it because then the two expenditure variances do then add up to the overall expenditure variance, and the two usage variances do add up to the overall usage variances (using the other method, they do not add up). Also, the way that the current examiner prefers is easier.
Both methods are acceptable in the exam – the examiner has made it clear that even though they give different answers they would both get full marks.
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