F5 Dec 2009 (Secure Net) Q1 part (b)

BBhupinder9y ago

Dear Sir, I've found the above mentioned question very tricky as I tackled it in following way: PRICE VAR Actual Quantity used x Difference in price of Material 3500kg x $1.25 = 4375 (A) Price Planning Var 3500kg x $4.8-$4 = 2800(A) Price Operational Var 3500kg x $5.25- $4.8 = 1575 (A) USAGE VAR Difference in original std Vs Actual Usage x Std price/kg 4000kg-3500kg x $4 = 2000(F) Usage Planning Var 4200kg-4000kg x $4 = 800(A) Usage Operational Var 4200kg - 3500kg x $4 = 2800(F) The above planning and operational variances check perfectly with basic price and usage variances and the basic variances check with the total Variance. I can see that the examiner has done it differently. Would I have got any marks if I'd done it this way? I can see, looking at the answer in the BPP revision kit as to what they've done. But there is no way I could've done that If I hadn't looked at the answer. How can I practice for this kind of a confusing question? What fundamental principle or rule needs to be understood? Your clarification would be much appriciated. Thanks, Bhupinder

John MoffatTutor9y ago#1

There are two ways of calculating planning and operational variances, that are both logical but that give different answers. The previous examiner preferred one way and the current examiner prefers the second way. However both ways will always get full marks. The way that the current examiner prefers is the way I now do it in my free lectures on planning and operational variances, and is much the easiest way.

AAkhil6y ago#2

Dear Sir, This is also regarding the question secure net 2009 dec Paper, this was the answer i got which is completly different as he mentioned above, could you please explain which one is the real answer... Planning price variance = ($4·80 – $4)4,200 = $3,360 Adverse Planning Usage variance = (4,200 – 4,000)$4 = $800 Adverse The total planning error (variance) is $4,160 Adverse The operational variances compare the actual spend with the revised budget figures. Operational price variance = ($5·25 – $4·80)3,500kg = $1,575 Adverse Operational usage variance = (3,500 – 4,200)$4·80 = $3,360 Favourable The total operational variance is $1,785 Favourable Thank you Akhil

John MoffatTutor6y ago#3

Please see my reply to the previous post.

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