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Hi,
Can anyone help?
I am looking at the variances section for paper F5 in December.
For example-the labour rate variance is calculated as (Actual Rate-Standard Rate) x Actual Hours.
I have seen example questions were it is calculated as above but in the December 2010 paper-question 1a(iii) it is calculated as (Standard Rate-Actual Rate) x Actual Hours (so the opposite way) this would obviously produce the opposite result of a favourable variance or an adverse variance.
I basically want to know-how do you know which way around it should be????
I am confused. Please help 🙂
Thank you
Steve18- Topics: 0
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Hello, it doesn’t matter how you calculate labour rate variance (actual rate-standard rate or standard rate-actual rate). The point is that if actual rate > standard rate so it’s adverse variance, if actual rate < standard rate it 's favourable variance.
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@arazz, good explanation there !
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