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Hi I would just like to seek clarity on the calculation of operational usage variance.
In order to calculate the operational usage variance, is the standard/original price used or the revised price?
I’ve seen two different videos where one person uses the standard/original price while the other person uses the revised price.
Please provide clarify on the formula.
Thank you so much.The reason that you will have seen different ways is that there are two ways of calculating planning and operational variances. Both ways are acceptable in the exam but they do give different answers.
The previous examiner used to do it one way whereas the current examiner does it the other way. But again, either way gets full marks.
The way the current examiner prefers (and the easiest way as well) is to calculate the usage variance using the original standard cost. This is the way that I show in my free lectures on planning and operational variances.
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