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Operational price variance (two approaches in Cima P1 Course Book – BPP)

Forums › CIMA Forums › Operational price variance (two approaches in Cima P1 Course Book – BPP)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by ailko.
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  • July 17, 2024 at 7:49 pm #708640
    ailko
    Participant
    • Topics: 2
    • Replies: 0
    • ☆

    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 Alexander

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