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Q1 Dec 2009 exam – I am confused, the price planning variance involves the revised usage x rev cost – rev usage x std cost.
However, the Planning usage variance uses the Rev Usage x Std price v Std Usage by Std Price.
Why if the price variance uses revised usage does the Usage variance does not use revised price?The price variance is looking only at the effect of the cost changing, so it takes the revised usage and compares revised cost with standard cost.
The usage variance is only looking at the effect of the usage changing, so it looks what effect it could have if the usage changed, but the cost remained the same.
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