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Respected Sir,
I want to ask a question that , “Is Material Planing price and Operational price Variance must be equal to the Material price Variance or not??”There are two ways of calculating planning and operational variances.
The better way is the way that the Student Accountant article (and our Course Notes and my lecture) do it. If you do it this way then the two price variances will not add up to the total price variance (and the two usage variances will not add up to the total usage variance). (Also the Kaplan books do it this way. I don’t know about the current BPP books, but they certainly did do it this way previously as well!)
The examiners answer to the question in last December’s exam calculates them a different way and they do then add up.
However, the examiner made it clear that either of the two methods would get full marks.
If you want to see an answer to the December question doing it the way in the article and in my lecture, then I have recorded an answer and you can find it from the main F5 page on here.
But in question Securenet(Dec09) the material price variance is not equal to operational and planing price variance why??
Exactly – as I wrote in my previous reply, the two will not add up to the total material price variance.
The reason is that although in both cases you are using the actual production in units, for the planning variance you are using the revised kg per unit, but for the operational variance we use the actual kg per unit.
thanks a lot . . .i saw your lecture you take wrong figure of “Revised hrs at actual cost” in calculating planning rate variance and also the examiner answer of labour rate planning and labour efficency operational variance is wrong…..but thanks a lot your lecture is very beneficial.
Sorry but my lecture is not wrong!!!!!
My lecture does it the same way as the article in the Student Accountant, and the same way that all the approved study texts do it.
And what about Examiner answer of DEC2012 of Variance??especially planing rate and operational efficiency variance ??Is it Correct??
Yes. If you read my first answer to your post carefully you will see that there are two different approaches to calculating planning and operational variances and the two approaches give different answers.
The examiners answer to the December 2012 question uses one approach, but her approach is different to the approach in the Student Accountant article and to the approach used by all the study text publishers (including OpenTuition).
She makes it very clear in her answer that either approach gets full marks (even though they end up with different answers).
You can find the answer using the same approach as my lecture (and the approach used in Securenet) linked from the F5 main page – there is a lecture going through the answer.
(I wrote all of this to you before in my first reply!)
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