PEV Past Papers - Variances help please

System

I have used the format to help remember that all variances are: "What it should have cost less what it did cost..." - given this can someone explain why in the past paper answers the formula is shown as the equivalent of (Actual - Budgeted) = Variance and not the other way around?

For example:

Fixed Actual overheads = £360000
Budgeted Overheads = £348000

Work out the Overhead Expenditure Variance:

I would have done it as:

£348000 less £360000 = £12000(Adverse)

However the answer lists it as the other way round:

£360000 less £348000 = £12000 (Adverse)

Is my methodolgy incorrect and if I adopt the above format even tho the answer is reflecting the same information, will I be marked down??

System

Re:PEV Past Papers - Variances help please

Hi Bizzy,

I to have had this problem, the past papers lay the answers out as you have described and I lay them out opposite.

My view is that as long as I include the correct amounts in the answer and end up with the correct answer (Adverse or Favourable)then I couldn't be marked down for it.

Is this correct?

Stacey

System

Re:PEV Past Papers - Variances help please

For both Volume and capacity variances you should use actual less standard.

If you forget then make sure you show your workings. Even if you get the wrong answer, if you show that you have approach the question with the correct method then you will still gain some marks.

System

Re:PEV Past Papers - Variances help please

Hi

This thread has totally thrown me,as I have always used std - actual for material and price variances as it also shows correctly whether they are favourable or adverse.

I will have to make sure that the answer is right then.

Best of luck for tomorrow
Eva