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In example 1 of OT notes,
You have multiplied 4400 kg by 5 (old std rate per kg). I have studied that multiply with 4.85 per kg which is revised cost.Is this the difference between two examiner ways you are talking about in lecture?
Can I ask you a personal question?
My local tutor said that when any variance is broken into operational and planning so you have to do only one change. Keep the formula same and when there is Planning variance so turn actual to revised budget and when operational so turn original budget to revised budget.For example, Material Price variance: (Actual cost per kg – Original budget cost per kg) x Actual Kgs.
Material Price Planning variance= (Revised budget cost per kg – Original budget cost per kg) x Revised Budget Kgs.
Material price operational variance = (Actual cost per kg – Revised cost per kg) x Actual kgsIs this correct way?
This way is correct but only if you already know the logic that the variance would be say, adverse if revised rate is higher than original rate. Because if we put figures in your given formulae, then figures will be calculated correctly but adverse become favourable and vice versa.
Well I’m not tutor but this is my understanding and I request tutor that correct me if I’m wrong.maximus07: What you have written in your first post is describing the other way of calculating planning and operational variances (which gives a different result. but is accepted in the exam).
The easiest way (and the way that the current examiner prefers) is the way that I explain in my free lectures. It sounds as thought your tutor is teaching the more complicated way. It is up to you to decide which way you want to do it.
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