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Sir in variances there was this mcq question and it was asking which of the following statements were correct
In one of the statements it said that a favourable variance will arise if the actual costs is greater than the budgeted costs
This was indeed a correct statemnent but I had this certain doubt thatwas contradictiong with this statement
Usually for direct material variance we compare the
(i)actual and planned
(ii)Planned and bugetedBut we don’t compare directly the actual and budgeted
Sir so how could that statement be the answer
The statement as you have typed it is certainly not correct.
For the material variance we compare the actual expenditure with the flexed budget, and if the actual expenditure is higher than the fixed budget there is an adverse variance.
Oh sir I mean that the revision kit book answer said that it was correct
Also I noted that there was a similar question like this and it said
to find which was true and false
(i)A variance is the difference between budgeted and actual cost
(ii)A favourable variance means actual costs are less than budgetedThe first answer was apparently false and the second one was true
Sir I really don’t understand how that answer came
I mean I would have understood if both were fault but i don’t understand when it said that one was false and the other was correctIs something wrong with the revison kit or something
Like you said a variance is the difference between the actual and flexed but I don’t understand why the textbook is doing thisThe first statement is false – we compare the actual cost with the flexed budget.
The second statement is also false – a favourable variance means that the actual costs are less than the flexed budget (not the original budget).
Oh okay sir but the kaplan exam kit answer section says that only the first one is false and the second statement is true
The answer in the revison kit for the first statement even says that a variance is the difference between the flexed cost and the actual cost for the first answer in the revision
But I was wondering how on earth the second statement could be true in the kaplan revision kit if the first statement has an answer such as this because that would mean that the second statement should also compare actual and flexed right?
I have already written that the second statement is not true, and explained why!
Yes sir I did notice the fact that you told that both were false and I also do understand the theory behind that
I just wanted to know whether the revision kit answer was printed wrongly since the kit made a mistake like this 2 times for those two similar questions
Oh alright thank you sir for answering and helping me clear out this doubt in this question
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