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When are the planning and operational variance favorable and adverse?
I actually do not understand that why the standard is changed in planning and operational variance which is called revised standard?
If costs increase, then the variance is adverse (because higher cost means less profit).
If costs are lower then the variance is favourable (because lower costs mean more profit).Operation variances are measuring variances that are under the control of the relevant manager (such as paying more for labour than they reasonably should have spent. Planning variances are explaining differences that are not under the control of the relevant manager (such as suppliers increasing the price of materials, or the original standard costs having been arrived at wrongly).
I do explain all of this in my free lectures on planning and operational variances.
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