pev variances

wolfe

hi
im solving a variance question and in a memo i have to explain the following
- 3 general ways PRODUCTION variances arise other than through errors
-identify 3 general reasons why there might be errors in reporting variances

thanks in advance

swampy1901

Hmm!! Had to think about this!! and then had a look in my books.
Production variances could be - the time taken to make the product - did it take longer or less time? If it took longer was it because of new staff - did they know how to operate machinery? did the machinery break down? were they using inferior materials? or better materials?
One variance can affect another variance adversely for example - money maybe saved by purchasing cheaper materials which is favourable. But this may use more materials because they have to use more materials to make the product which is adverse. In addition because they have to use inferior materials it can take longer to make a product resulting in another adverse variance for labour efficiency.
Not too sure about this next bit though - errors in the variances....... is the standard correct? ie not out of date. Eg You buy fuel to run the machines but the cost of fuel keeps rising so the standard set say maybe a year ago is hopelessly out of date.
Errors in variances can arise for example if you purchase the materials from abroad when the exchange rate is unfavourable to you. So you may use the same amount of materials but spend more money on the materials.
Cant think of a third one!!
I'm having trouble with remembering the formulas for the efficiancy and capacity efficiencies. I'm on my third resit for this exam - you'd think I'd know it by now!!:confused1:

Swampy

wolfe

hi Swampy
many thanks for the reply. the reasons u gave for the prod. variances are same as the ones i came up with.

errors in variances can arise when variances are calculated without flexing the budget
.wat do u think?

jay cutler

One general reason could be that it's possible the standard set for the budget is incorrect.

wolfe

hi jay
i keep thinking the question says errors in reporting variances. n the reasons i keep coming up wid are for errors in calculating variances. wat can go wrong when reporting the variances....?? im drawing a blank

wolfe

hi everyone
i really need help with this. ive been stuck on this question for so many days. any idea is welcome.
thanks in advance

ckane4

PEV Variances

Question seems very poorly constructed! Only thing I can think of for you is to check the model answer from the past papers section in student services - assuming you are answering a past paper because I don't recall coming across that question...

I'm still struggling just trying to memorise the RIDICULOUS amount of formulas we need for this paper! Also, all of the past papers seem to have huge differences in the way they are laid out as well as the questions themselves, definitely the most I've had to study so far in AAT and the least prepared I feel for the exam!!!!!!!

Good luck for Monday!

karenv

I know what you mean about the number of formula.
Thing that always gets me is that if this was a work situation ( instead of an exam) it would be perfectly easy to look up the formula you required.

ckane4

pev variances

Lol, too true!! They are certainly not the "realistic scenarios" they claim to be!!!!!!!