Hi
I can't get my head around this.
When we do price variance we do Actuual quantity *actual price with actu quantity*STD price
I understand this
But when we get to usage variance
Why is it
Aq*std price and std quan *STD price
why is it not aq*ap and sq *sp
I did see the lectures but can't understand this.
Ask the Tutor ACCA PM
Variance
6y ago#1There are two reasons why the actual total cost is different from what it should be. One is that they have used the wrong amount, and the other is that they paid the wrong price.
What we are doing is separating out the effect of the two reasons.
For the usage variance we compare the actual usage with what it should have been, costed out at standard price. This explains the effect of just having used the wrong amount.
The other effect is that we have paid the wrong price, so we then compare the actual usage at standard price with actual usage at actual price. This explains just the effect of having paid the wrong price.
I suggest that you watch the Paper MA (was F2) lectures on variances, because this is revision from Paper MA.
Thank you.
Is it same.reason behind material yield variance also where we compare actual in STD mix and std in STD mix.. what would have been the mix and what was the plan
6y ago#3Correct :-)
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