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 F
Labour rate---------------------------30000 F
Labour efficiency--------------------10000 A
LAbour idle time---------------------12000 A
Total Labour variance--------------$8000 F
Variable OH expenditure----------15000 F
Variable OH efficiency-------------16000 A
Total Variance OH variance-------$1000 A
Fixed OH expenditure--------------12000 F
Fixed OH efficiency-----------------11000 A
Fixed OH capacity------------------14000 A
Total Fixed OH variance-----------13000 A
Fixed 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.
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Total variances
4y ago#1Adding 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 F
Material Usage Planning------------------20000 F
Material Usage Operational--------------18000 A
Total Material Usage variance-----------$2000 F
Labour Rate Planning----------------------15000 F
Labour Rate Operational------------------12000 A
Total Labour Rate variance---------------$3000 F
Labour Efficiency Planning---------------20000 F
Labour Efficiency Operational-----------18000 A
Total Labour Efficiency variance--------$2000 F
Sales Price Planning-----------------------15000 F
Sales Price Operational-------------------12000 A
Total Sales Price variance----------------$3000 F
Sales Volume Planning--------------------20000 F
Sales Volume Operational----------------18000 A
Total Sales Volume variance-------------$2000 F
Is that all correct? I asked because I had doubts!
4y ago#3There 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 F
Sales Mix-------------------------------------12000 F
Sales Quantity------------------------------10000 A
Total Sales volume variance------------$2000 F
Please say whether we will be asked material mix and sales mix in the exam (no labour mix is relevant for paper PM)?
4y ago#5I really do not know why are you are typing out what is explained in my free lectures!
Materials mix and sales mix are both examinable, which is we have free lectures on both of them.
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