Help with Section 1 of PEV

mikefcn Registered Posts: 2 New contributor ?
Hi Everyone

I have attempted to pass PEV on 2 occasions so far, 1st passing section 1 and failing section 2 and then vice versa in June 2008. I really want to move on now and could do with some assistance with remembering the variance formulas.

I have been told off a friend that when she did PEV her teacher gave her a poem to remember then by, can anyone add to this or is my friends teacher crazy????

I would really appreciate any help with PEV.

Kind regards



  • Marg22
    Marg22 Registered Posts: 84 ? ? ?
    Hi Mike

    Unfortunately I have no poem, I've had to do it the hard way. I think that logic needs to be found in everything we try to do or there really is not much point in doing it.

    Material Price Variance

    Material used X standard price - Actual cost = Material price variance

    The standard is what the budget is set at.

    If price paid is less than budget it will be favourable, if its more it will be adverse.

    Material Usage Variance

    The budget sets how much you should use say per unit, so you work out how much you should have used.

    Quantity should use - Quantity actually used = ? then X standard price.

    If you have used less than the standard then it is favourable, if its more it is adverse.

    Apply this to the labour variances.

    Hope this helps a bit.

    Kind Regards

  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    One brief addition
    remember that the material price variance is the difference between the price paid for any purchases and the standard price per kg x the kgs purchased

    Sometimes purchases are not the same as issues

    material usage variance is the difference between the standard material cost of the units produced and the standard cost of the kgs issued

    Where the purchases exceed the issues, stock increases. Where issues exceed purchases, stock falls.

    This was last tested (and not well answered) in the Tea question on PEV in Dec 2007.
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