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Hi sir,
Here’s my query:
In the sales volume operational variance, we compare the difference between the actual sales volume and the revised budget, right?
But in the Material usage operational variance it says ” The variance is calculated by comparing the actual material usage with the standard usage in the revised standard, but it is then converted into a money value by applying the original standard price for the materials, not the revised standard price.”
But my teacher said that in real life we do compare the actual with the revised budget not the original budget.
So what would you say?
There are two ways of calculating the operational and planning variances. They both have a logic but they give different answers. However the examiner has made it clear that she accepts either way of doing it.
Best is to look at my answer to a previous exam question. I do it the way that it seems your teacher told you (which I think is the better way), and I explain why it is different from the other way.
You can find it here:https://opentuition.com/acca/f5/f5-december-2012-question-2-planning-and-operational-variances/
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