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Hi, I have one question about planning and operational variances for materials. In one example they used for “material price planning variance” this formula:
(Std price-Revised price)*Revised quantity
In another one:
(Std price-Revised price)*Actual quantity
Between them which one is correct. I mean if I am asked such kind of question in the which one I have to use?
Thanks in advanceIn my opinion, second one is the right formula. Because for variance calculations, we use Flexible Budget which is based on Actual Quantity. In other words, Flexible Budget is the original budget adjusted according to Actual Quantity.
I’ve seen some examples about this. Some of them were solved in one way, the rest was solved in another way. I want to identify which of these methods will be used in exams.
You must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
As I explain in my free lectures, there are two methods which give different answers. There are arguments for both methods, and the examiner has made it clear that you will get full marks whichever of the two methods you use.
The previous examiner preferred one method. The current examiner prefers the other method (which is easier). My free lectures explain the method that the current examiner prefers (which is also the method that the current editions of the study texts from the ACCA publishers also explain).
So in the exam in high possibility the examiner assess my answer with the following formula yeah:
(Std price-Revised price)*Revised quantity ?I couldn’t find your lecture about this situation. What is the name of that lecture? I’ll watch that
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