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bedco (12/13)
For part a) of this question, should the variances for bed sheets and pillow cases be calculated separately and then be added to arrive at the total variance, or should they be calculated in combined form.
Also how to calculate the total material cost variance. Should actual usage and price be used or should revised usage and price be used.
The question specifically asks for them to be calculated separately, and in total. As regards the total, you do not need to calculate this separately – just add together the individual variances.
For the cost variances, there are arguments for using either the actual quantity or the revised quantity and the examiner accepts either (even though the answers are different). The examiner states this in her answer (and I explain this in my free lectures).
The easiest way and the way that the current examiner prefers is the way that I explain in my free lectures. i.e using the actual quantity and comparing the original standard price with the revised price for the planning variance, and comparing the actual price with the revised price for the operational variance.
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