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Planning variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Planning variance

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.
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  • March 17, 2012 at 12:40 am #51887
    Vipin
    Member
    • Topics: 151
    • Replies: 374
    • ☆☆☆☆

    i have a doubt from a question of kaplan.

    original budget
    6 hours labour @$7 per hour

    for period 3, 2500 units were budgeted to be produced and sold but the actual production and sales were 2850 units.

    weather conditions unexpectedly improved for the period with the result that a 50c per hour bad weather bonus, which had been allowed for in the original standard, didnot have to be paid. because of difficulties expected with the alternative material, management agreed to pay the workers $8 per hour for the period 3 only. during the period 18800 hours were paid for.

    kaplan treated this as two conditions as planning. later condition should be operational.

    calculation is ‘
    labour rate planning :weather bonus
    (7-6.5)*6*2850=$8550FAV
    labour rate planning:alternative material
    (6.5-8) *6*2850=$25650ADV

    later one should be operational and the calculation is as if it operational. but kaplan recongnize it as planning.
    is it an error?
    if u have kaplan book, page no is 330.

    March 18, 2012 at 2:19 pm #95562
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    Kaplan are correct to treat it as a planning variance.

    The reason is that since they expected to have problems with the material, the agreed (in advance) to pay $8 – this was part of the planning. There would only be an operational variance if they ended up paying more or less than the $8 planned for.

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