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Dear All!
I would like to ask for your help regarding the method of calculating Opeational price variance.
I have run into 2 caculation method in my CIMA P1 Course book.Example:
Budget: raw meterial cost per unit of product: 2kg of cooper per 1 usd per kg
Actual: 1 000 units produced at a cost of 3 250 usd for 2 200 kg of cooper.Material price operational variance:
Revised standard cost for revised standard kg for actual output 1 000 * 2 * 1,5 = 3 000 (why not 2200*1,5)Actual cost 3 250
My question relates to the “Revised standard cost for revised standard kg for actual output” part.
Why the budgeted usage kg/unit is used instead of the actual usage of kg/unit? In this very book in a different example the actual usage of kg/unit is being used, the same way as OpenTuition tutor is showing it in the video.
Can you please tell me under what condition can the budgeted usage kg/unit used in the calculatin of “Revised standard cost for revised standard kg for actual output” part? Thank you in advance for your help.
Best regards AlexanderIn some cases, especially when evaluating geometry dash online price variances, you might use the budgeted usage (standard quantity per unit) to calculate the revised standard cost. This approach emphasizes what the company expected to use based on the planned production levels.
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