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New revision kit q203,page 55,
I didn’t understand why in planning price variance Revised standard usage(0.042kg) is multipled with variance and not the old standard cost(.04kg)? and again in operational usage variance revised standard cost is multiplied with variance in usage .Whats logic behind taking revised standard usage in planning price and not same in operating price ,isn’t both case to be multiplied by standard cost?but why different
hope the question is clear
I agree with you. The problem arises because there are two ways of calculating operational and planning variances, which give different answers. There is an argument for both ways, and the examiner always says that doing it either way will get full marks.
This question was set by the previous examiner, who preferred one way – the current examiner prefers the other way (which is easier and more logical). Unfortunately BPP have not updated the answer to this question to do it the way the current examiner prefers.
If you watch my free lectures on this, I do it the way that the current examiner prefers (and explain the logic at the same time) – I think you will be happier with it 🙂
I have already gone through your lectures and always using resources for reference so you mean to say i should just work out both planning price variance and operating usage variance with old standard price set .I think I am happier with it working out these variance with prices and usage set in old not revised .Will that be fine?
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