splitting variances into planning and control factors

wolfe
wolfe Registered Posts: 121 Dedicated contributor 🦉
hey everyone! can someone please explain to me what are planning and control factors into which the variances are split?? any help is appreciated

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  • crispy
    crispy Registered Posts: 466 Dedicated contributor 🦉
    Simple transaction to demonstrate:

    Original Budget planned to sell 600 units @ £72
    Actual result was to sell 600 units @ £ 86

    However due to market conditions it was determined that a realistic selling price should of been £ 82. Split into planning and operational variances: -

    Operational Variance
    Adjusted Standard : 600 units @ £ 82 = 49,200
    Actual : 600 units @ £ 86 = 51,600
    Variance = £ 2,400 (F)

    Planning Variance
    Adjusted Standard : 600 units @ £ 82 = 49,200
    Original Standard : 600 units @ £ 72 = 43,200
    Variance = £ 6,000 (F)

    Basically it shows that out of a total variance £ 8,400 (F) - £ 6,000 was due to the original plan being unaccurate and £ 2,400 was due to other factors.

    Hope this is of some use.
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
    thank you crispy

    hi .thanks alot for crispy. you have been a great help.thanx again
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