Pev - Overhead variances

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Jo Chambers
Jo Chambers Registered Posts: 3 New contributor 🐸
Hi,
I'm still really struggling with knowing which figures to use to calculate all of the overhead variances - any tips on remembering what is what?
I work in an accountancy practice so DFS revision is going well but i just don't know where to start with PEV! Don't seem to be able to get to grips with budgets at all!
If anyone has any tips on remembering each calculation it would be greatly appreciated!
Thanks :-D

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  • Lou1234
    Lou1234 Registered Posts: 210 Dedicated contributor 🦉
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    Hi.

    What worked for me was writing down each formula on a small card and I carried them around with me and kept reading them at random points in the day. I had the variance on one side and the formula on the other. Then would test myself.

    The other thing is to think about exactly what they are asking you do to which should help you think about which figures you need to use.
  • Jo Chambers
    Jo Chambers Registered Posts: 3 New contributor 🐸
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    Thank you, will definately give that a try.
  • timgriff
    timgriff Registered Posts: 55 Regular contributor ⭐
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    Hi, i know they say memorising stuff isn't a great way to understand a topic but i found this helped when I was trying to understand overhead variances (plus for me i find it easier to memorise it first then understand it):

    Fixed Overhead Expenditure Variance: Simply actual cost - budgeted cost

    Remember that the Capacity Variance + Efficiency Variance = Volume Variance, so....

    ABC: Actual Hrs - Budgeted Hrs x BOAR = Capacity Variance

    SAE: Standard Hrs(1) - Actual Hrs x BOAR = Efficiency Variance

    1) Standard hrs of actual production.

    &..... Volume Variance = Standard Hrs - Budgeted Hrs x BOAR

    Once it's done a few (hundred) times it may start to stick!
  • Jo Chambers
    Jo Chambers Registered Posts: 3 New contributor 🐸
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    Thank you so much - thats great, looked at it this morning & have remembered it! Off now to complete a past paper, lets hope it sticks!
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