Operating statement (variance reconciliation)
An operating statement in standard costing reconciles budgeted profit or contribution to actual results using relevant variances. Start with the stated budget, add favourable effects and subtract adverse effects on the same profit basis. Ensure volume is valued at standard profit under absorption or contribution under marginal costing as required. Do not count a total variance and its components twice. The bridge should reconcile arithmetically and explain significant business causes.
Worked example
Budgeted profit $20,000 plus favourable sales-price effect $2,000 less adverse volume $1,000 and adverse net cost variances $3,000 gives actual profit $18,000.
Common mistake
This use of operating statement is a variance bridge, not a synonym for every statutory income statement or an IFRS18 pro forma.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |