[Anna]

this is the answer:

Full opportunity costing will also allow for imputed interest costs on the incremental loan. The correct interest
rate is the overdraft rate since this represents the incremental cost the company will pay. Simple interest charges
for three months are therefore: (3/12) × $20,000 × 18% = $900.

sorry but it is not clear, what is meant under full opportunity cosling in this case especially regarding imputed interest cost, which is normally not relevant.

thanks.

[Anna]

Dear Mr. Moffat,

sorry for the question, I think I know the answer already.

Thanks.

[Anna]

Thanks, it is very helpful.

[Anna]

Yes, this is true, do nothing, but given we know that the loss could be predicted, we have to pay for this information. And this is a value of all lossess for all possible outcomes multiplied by probability. Correct?

[Anna]

It is not what I ask, I ask, if the loss occurs in one of the occasions. Value of perfect information, would it be the amount of loss x probability? Or is it the highest amount, that could be chosen, if the demand is predictable x probability?I noticed that in some answers about perfect information, there was just amount of loss taken and x probility? But what If there are several demand rows, and we could predict also the higest profit?

Thanks.

[Anna]

the free lecture on which topic? could you please advise?

Thanks.

[Anna]

Could you please explain, what is MCQs?

[Anna]

Thanks sir! I think the main confustion came from the fact that there is no precise formular for planning and operational variance for labour in Kaplan textbook, but for material price and usage. It is assumed that labour variance can be calculated based on the same principle. In this answer though there differencies, how they treat labour rate and efficiency variance.

Especially rate. As I understand the operational rate variance is calculated based on actual usage of hours, it means hours as 18800 are taken for comparison of price of labour actual and revised. Whereas in the answer they took the the units number 2850 units and flexed them to 6 hours of labour usage. Should this be so for operational labour variance? or both is accepted?

thanks.

[Anna]

I also have a problem with the same example. I am not figuring out the answer notes in the text book. As for labour rate I agree with the answer, but the labour efficiency planning variance cannot be understood here, as there was not revision of production methods.

There were two reconciliation methods proposed one only with traditional variances and the other with both planning and operational. The second version proposed flexing the 2850 units produced x 6 h and mulitplying it by 8 pounds as actual price of labour and comparing it with actual usage of 18800 hours times 8 pounds. . I thought that operational variance is taken with original budgeted price? is it not correct? Why is revised with actual price then?

Thanks.

[Author]

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