Planning variance compares original standard budget to revised standard budget. It is not in control of management and they shouldn't be held accountable.
Operational variance compares actual budget to revised standard budget. It is in control of the management and they should be held responsible.
The manager isn't responsible for Planning variance but they are responsible for Operational variance.
The difference between standard & actual may arise due to unrealistic budgets and not solely due to operational factors.
The purpose of calculating planning & operational variance is because our original budget is changed (ie revised) due to some changes reason but why the original plan is revised please explain?
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Planning & Operational variance
4y ago#1There are many reasons why the original budget might be revised. The most obvious one (as regards materials) is that there has been a permanent increase in the cost of buying materials.
I do give examples (as well as explanations) in my free lectures on planning and operational variances.
You did not say what I wrote above was all correct or not?
Is it correct too:
In Planning variance, we change Actual to Revised Standard
In Operational variance, we change Standard to Revised Standard
4y ago#3That is correct.
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