Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › variance

- This topic has 3 replies, 2 voices, and was last updated 1 month ago by LMR1006.

- AuthorPosts
- April 22, 2023 at 12:45 pm #683353
sir

Is there anyway you could answer part B doctor only of March/June 2021_Medical Temp Co Question?

i think the variance is $40 and contribution is 80% so the planning variance is $32

but the answer is $64April 22, 2023 at 9:05 pm #683375Volume / market size

For Q1 it says 14m nurses and 8m doctors

For Q2 it says 18.9m nurses and 8.2m doctorsand Actual “revenue” is 5.3m nurses and 3.6m doctors

This is volume / market size so we have to get the share and the contribution

For Nurses it is 30% so 0.3 and contribution of 80% so 0.8

For Doctors it is 40% so its 0.4 and contribution of 80% so 0.8Standard cont

=14000*0.3*0.8

=8000*0.4*0.8

co would maintain this from qtr 1 in qtr2Revised cont

=18900*0.3*0.8

=8200*0.4*0.8

“same proportion”This is total revenue for Nurses and Doctors so contribution of 80% so * 0.8

Actual cont

=5300*0.8

=3600*0.8Nurses

Std cont 3,360

Market size variance – Plan 1,176

Rev cont 4,536

Market share variance – Op (296)

Act cont 4,240

Doctors

Std cont 2,560

Market size variance – Plan 64

Rev cont 2,624

Market share variance – Op 256

Act cont 2,880

Hope this helps

April 23, 2023 at 2:22 am #683378sir

std 8000/2000*40%=1.6

rev 8200/2000*40%=1.64

act 3600/2000=1.8(1.64-1.6)*80% plan variance

(1.8-1.64)*80% op varianceIn quarter 1 the market was for 4000 doctors and their share was 40%, so they will have budgeted on 40% x 4000 = 1600

It turned out that in quarter 2 the actual size of the market was 4100 doctors and so they should really have expected 40% x 4100 = 1640

The difference of 40 is due to the change in the market size and therefore the market size variance is 40 x the standard contribution of 80% = $32 favourable, and is a planning variancesir

i think this is the same logic but the answer is wrongThe question says that when the budgeted for quarter 2 they assumed that they would maintain the share of the market that it had in quarter 1.

In quarter 1 the market was for 14,000 nurses and their share was 30%, so they will have budgeted on 30% x 14,000 = 4,200 in quarter 2.

It turned out that in quarter 2 the actual size of the market was 18,900 nurses and so they should really have expected 30% x 18,900 = 5,670.

The difference of 1,470 is due to the change in the market size and therefore the market size variance is 1,470 x the standard contribution of 80% = $1,176 favourable, and is a planning variance.

So they should have expected to supply 5,670 nurses, but they actually supplied 5,300. So the difference of 370 is due to a change in their market share and therefore the market share variance is 370 x the standard contribution of 80% = $296 adverse, and is an operational variance.

The examiner has not ‘made up’ more variances. Although market share and market size variances are rarely asked you should have at least one question on them in your Revision Kit.

April 23, 2023 at 12:35 pm #683391This is not correct……

OK let’s look at it a different way:

The scenario tells us that standard contribution margin is 80% for both nurses and doctors, and the standard rate is $1,000 and $2,000 respectively.

This gives standard margins of $800 and $1600.So Doctors = 40%*4,000 = $1,600

Budget 8,000,000 / 2000 = 4,000 * 0.4 = 1,600 * $1600 = 2,560,000

Revised 8,200,000 / 2000 = 4,100 * 0.4 = 1,640 * $1600 = 2,624,000

Actual 3,600,000 / 2000 = 1,800 * $1600 = 2,880,000

The difference is $64 & $256

You are taking the difference of 40 and multiplying it by 80% which is not correct it should be

by multiplying it by 80% of $2000 ( 40 *0.8 * 2000) = 64,000Stop looking at the answer and think about the question itself.

- AuthorPosts

- You must be logged in to reply to this topic.