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Standard Costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Standard Costing

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • September 16, 2021 at 9:56 am #635822
    James124
    Participant
    • Topics: 166
    • Replies: 138
    • ☆☆☆

    In Kaplan, it is saying that there are few factors of causes of variance. One of them is Random Factors.

    “Random factors
    Random factors are by definition uncontrollable, although they need careful monitoring to ensure that they are not, in fact, one of the other types of variance.”

    Can you explain this. Specially the last line.

    September 16, 2021 at 5:20 pm #635838
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is actually a little bit silly for Kaplan to have stated this because it isn’t really relevant for Paper MA (but becomes maybe more relevant for Paper FM where variances are looked at in more detail).

    However the purpose of variance analysis is to identify what has gone wrong so that we can try and correct any problems in the future. For example, we may have made mistakes in the budgeting or we may have bought goods from the wrong supplier and been charged more or we may have paid the workers more than we were supposed to. However even if we had done everything ‘perfectly’ there could still be (hopefully small) variances such as the cost of heating the factory being more than we had budgeted for because the weather was colder than normal. That is something that is random, that we couldn’t predict, and that we cannot control.

    Be aware that the Study Texts do contain much more than is needed to be able to pass the exam. If you are watching my free lectures then they are a complete free course and cover everything needed to be able to pass the exam well.

    The essential book (however you choose to study) is the Revision Kit (or for Kaplan, the Exam Kit) because it is full of exam standard questions to practice, and practice is vital to passing the exam.

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