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Good evening John,
i have calculated the following variances using the tabular method:
i have correctly calculated the
Planning Usage: $27,500 (F) and the Operational Price: $10,890
However the results i get for the Planning Price and Operational Useage is different
Planning Price: $15, 675 (A)
Workings:
AQSP (11,000 x 9.5) x 5 = $522,500
AQAP (11,000 x 9.5) x 4.85 = $506,825Operational Usage $21,340 (A)
Workings:
SQSP (11,000 x 9.5) x 4.85 = $506,825
AQSP 108,900 x 4.75 = $528,165can you confirm that these calculations will also be correct in the exam?
Many Thanks
No, they would not be correct.
There are two ways of calculating planning and operational variances that give different answers. The current examiner prefers the way I do it in the lecture (which is easier anyway) but does give full marks for the other way.
However, this question specifically asks first for the expenditure and usage variances, and then asks for them both to be analysed into planning and operational. Therefore, the planning and operational usage variances have to add up to the total usage variance; and the planning and operational expenditure variances have to add up to the total expenditure variance. So for this question it has to be the way the current examiner prefers it.
(Also your operational usage variance would be wrong anyway – always when calculating any usage variances we have to cost out both usages at the same price.)
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