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To calculate total variances we need to accumulate their sub-variances such as:
Material Price————————12000 F
Material Usage———————-10000 A
Total Material variance————$2000 FLabour rate—————————30000 F
Labour efficiency——————–10000 A
LAbour idle time———————12000 A
Total Labour variance————–$8000 FVariable OH expenditure———-15000 F
Variable OH efficiency————-16000 A
Total Variance OH variance——-$1000 AFixed OH expenditure————–12000 F
Fixed OH efficiency—————–11000 A
Fixed OH capacity——————14000 A
Total Fixed OH variance———–13000 AFixed OH volume can also be calculated because both efficiency and capacity are included in it.
Please correct me this is the way we calculate total variances. And correct if I am missing anything here.
Adding up the individual variances as you have done does give the total variance, and your figures are correct.
However, it depends what information is given in the question – as I show in my free lectures then if you have the information then you can calculate the total variances directly.
(Also, do please appreciate that very little is asked in Paper PM with regard to these basic variances because they are all examined in detail in Paper MA (was F2). In Paper PM almost all questions on variances (and certainly in Section C of the exam) are on the advanced variances (mix & yield and planning & operational).
Planning and Operational variances:
To calculate total variances of planning and operational variance we need to accumulate their sub-variances such as:
Material Price Planning——————–15000 F
Material Price Operational—————-12000 A
Total Material Price variance————-$3000 FMaterial Usage Planning——————20000 F
Material Usage Operational————–18000 A
Total Material Usage variance———–$2000 FLabour Rate Planning———————-15000 F
Labour Rate Operational——————12000 A
Total Labour Rate variance—————$3000 FLabour Efficiency Planning—————20000 F
Labour Efficiency Operational———–18000 A
Total Labour Efficiency variance——–$2000 FSales Price Planning———————–15000 F
Sales Price Operational——————-12000 A
Total Sales Price variance—————-$3000 FSales Volume Planning——————–20000 F
Sales Volume Operational—————-18000 A
Total Sales Volume variance————-$2000 FIs that all correct? I asked because I had doubts!
There are two ways of calculating planning and operational variances that give different answers. Although the examiner accepts either way, she prefers the way that I explain in my lectures. For this way, what you have written is correct.
Mix and Yield variances:
Please help me with this question too on total variances.
To calculate total variances of mix and yield variance we need to accumulate their sub-variances such as:
Material Mix———————————-12000 F
Material Yield——————————–10000 A
Total Material usage variance———–$2000 FSales Mix————————————-12000 F
Sales Quantity——————————10000 A
Total Sales volume variance————$2000 FPlease say whether we will be asked material mix and sales mix in the exam (no labour mix is relevant for paper PM)?
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