Planning and Operational Variances

Ppookie11y ago

I have attempted the December 2012 Question 2 on Planning and Operational Variances and i would just like to know if my solution is acceptable since my solution differs a bit from the solution provided by ACCA. My Total Traditional Labour Cost Variance of $13,800A is the same as the solution when the Total Labour Rate and Labour Efficiency is totalled but the sub variances does not reconcile with ACCA's solution. The following are my answers BASIC VARIANCES 1.) Total Labour Rate - (12000 hrs x $12) - $136,800 = $7200F 2.) Total Labour Efficiency - (20500 units x 0.5hrs) - 12000 hrs x $12 = $21,000A TOTAL LABOUR COST VARIANCE = $13,800A PLANNING VARIANCES Rate: 20500 units x 0.5hrs ($12 - $11.40) = $6150F Efficiency: 20500 units (0.5hrs - 0.6hrs) x $11.40 = $23,370A OPERATIONAL VARIANCES Rate: (12000 hrs x $11.40) - $136,800 = $0 Efficiency: ((20500 units x 0.6hrs) - 12000 hrs x $11.40) = $3420F My concern is that I've noticed on the ACCA solution that the Labour Efficiency Planning and Labour Efficiency Operational Variances reconcile with the Basic Labour Efficiency Variance and my answer is not reconciling like that. So am I doing something wrong? Or is my answer acceptable they way it is?

John MoffatTutor11y ago#1

The problem is that there are two ways of calculated planning and operational variances. All of the Study Texts do it one way (the better way) but the examiner suddenly decided to do it a different way (which is a less sensible way!). However, either way is acceptable in the exam (even though they give different answers). To see the correct answer doing it your way, watch the following lecture (where I go through it): https://opentuition.com/acca/f5/f5-december-2012-question-2-planning-and-operational-variances/

Ppookie11y ago#2

I understand it better now. Your demonstration in the lecture is the same way i know how to do it. Do you think i should be familiar with both methods for the exam? Note: Just an observation in your lecture. For the Labour Rate Planning Variance, $140,220 - $147,600 = $7,380F but you used $7400F. Can you explain why?

John MoffatTutor11y ago#3

I will have to check - it sounds as though I have made an arithmetic mistake. Sorry :-(

Ppookie11y ago#4

Your very welcome :)

John MoffatTutor11y ago#5

:-)