Kaplan Home Study - BUDGETING

PhilipG Registered Posts: 26 ? ? ?
Hello everyone

Is anyone doing Budgeting through home study or perhps you are Technician qualified - please get in touch

Thanks Philip


  • Princess05
    Princess05 Registered Posts: 14 Regular contributor ⭐ ? ⭐
    Hi Philip...

    Is budgeting aka unit 8...? I get confused with the new context. I ams tudying for
    Unit 8:PEV with Kaplan.
  • Vince22
    Vince22 Registered Posts: 12 Regular contributor ⭐ ? ⭐
    I've just begun 'budgeting' via Kaplan. It seems to have some elements of ECR (absorption and marginal costing) and some from 'reports and returns' such as time series and trends etc, probably as revision.
  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?
    Hi there yes budgeting could be unit 8 or 9 as I have last years book Management Performance and Resources but Kaplan don't call them units
  • Princess05
    Princess05 Registered Posts: 14 Regular contributor ⭐ ? ⭐
    Unit 8 Variances

    Could anyone give me any useful tips on learning the variances...(price / usage variance etc)? I seem to be struggling with these as each paper has a different format...I get used to working them out one way and then have to find another way when I attempt another paper...!
  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?

    I gues your working on chapter 5/6 - I can't guide u at this point as I too am experiencing the same issues - I attemped a workbook exercise yesterday no. of days stock now the book has the formula stock/???? haven't got book in front of me then x 365 - the answer in the book was x 12 i.e. months - I feel the books and some learning materials are not consistant - another was working out current RPI/RPI at the beginning of the period and creating this as a percentage - the answer was 168/160 subtract 1 (the whole number) and multiply by 100 - nowhere in the book does it mention about subtracting the "whole" number (168/160 = 1.05 then minus the 1 and x 100) very misleading unless you are working in abn environment whereby you are using them every day
  • Princess05
    Princess05 Registered Posts: 14 Regular contributor ⭐ ? ⭐
    Unit 8 Variances


    I have looked back on past comments on the forum and I seem to have found this post very useful...however crude it is...

    Material & Labour variances - PURE / AS AS
    Price = (standard - actual) x Actual
    Usgae = (standard - actual) x Standard
    Rate = (standard - actual) x Actual
    Efficiency = (standard - actual) x Standard

    Fixed Overhead variances - Even Chickens Eat veg / But All Suggestions State All Blokes Are B**tards
    Expenditure = Budget - Actual
    Capacity = Actual - Budget
    Expenditure = Standard - Actual
    Volume = Standard - Budget

    Not sure if this will be of use to you but I've found it a real help!
  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?
    Thanks Princess05 - so what's your name then x I am using the Kaplan books but haven't read chapters 5 + 6 Standard costing + variance analysis and... Investigating and reporting variances.

    Now I spoke with a tutor at kaplan the other day and he told me Kaplan were in discussion with AAT re if these parts were relavent to the exam so i haven't currently read them - having said that chapter 7 talks of variances so i may end up reading those chapters.

    I am confident when reading the chapters but seem to have a barrier inside me when it comes to the questions - and struggle to answer anything - admittingly AAT Level 4 is harder than Foundation and intermediate put together but just feel inferior at times when studying
  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?
    Re Variances - I found this Princess05


    Material Price Variance
    Basically the difference between the price they paid for what they used, and the price they should have paid (using the standard/Budgeted Cost) for the actual quantity.

    ie. A nail (Hammer and Nail!!) Standard Cost is £3, they bought 4 Nails for £10. The Material Price Variance is then - (4x£3) - £10 = £2 Favourable. It's favourable because they paid less than they should have

    Material Usage Variance
    Basically the difference of how much material/units they should have used and how much they did use, you then times this by the standard cost per unit.

    PS this isn't my work

    ie. A Box of Nails Should Contain 100 Nails, in production of making 1 box they used 110 Nails, the material usage variance is (100-110) x £3 = £30 Adverse. This is adverse because they used more than they should have. Remember to multiply the difference by the STANDARD cost of the unit.

    Labour Price Variance
    Basically the same as Material Price Variance, the difference between how much labour should have cost and how much it did.

    ie. A employees standard labour rate £5, they spent £16.50 on three labour hours. The formula is (3x£5) - £16.50 = £1.50 Adverse, it's adverse because they spent more than they should have

    Labour Usage Variance
    Basically The same as material usage variance, how many hours they should have spent on labour, and how many they did. At the Standard Rate!!

    ie. An employee makes 10 boxes of nails in an hour, 50 Boxes of nails were made in 7 hours. It should have taken the employee 5 hours, therefore the formula is (5-7) x £5 (Standard Cost) = £10 Adverse (Because they spent more than they should have!


    Fixed Overhead Expenditure Variance
    Budgeted Costs of FO - Actual Costs of FO - Nice and Simple!

    ie. Budgeted Costs for Fixed Overheads were £100,000, they actualy spent £108,000. Therefore 100,000-108,000= -8000, it's adverse because more was spent than planned.

    Fixed Overhead Volume Variance
    Absorption Rate x (Standard for Actual Output - Budgeted Output)

    The absorption rate in normally stated in the exams, it is important to look whether it's units based or hours based, and then the bits inside the brackets will be the same, the formula's below work on the same principal.

    Fixed Overhead Efficiency Variance
    Absorption Rate x (Standard for Actual Output - Actual Taken)

    Fixed Overhead Capacity Ratio
    Absorption Rate x (Actual Taken - Standard Hours for Budgeted Output)

    The best tip for fixed overhead is to make sure that the Capacity Ratio + Efficiency Ratio = Volume Ratio (Remember one, or both the numbers might be negative)
  • Princess05
    Princess05 Registered Posts: 14 Regular contributor ⭐ ? ⭐
    Unit 8: PEV Variances

    This is my last exam and I am finding it rather difficult to grasp the concept of all the variances...

    I am similiar to you where I find the chapters an easy read but when putting pen to paper in order to complete a task myself I am struggling with this PEV. At times I feel like I am wasting my time.

    Have you just started Technician level...?

  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?
    Hi Natalie yes started level 4 through Kaplan currently working through budgeting but the formulas are throwing me take ROCE net profit before interest and tax divided by capital and reserves and long term debts I understand that but the answer shows net profit before interest and tax divided by total assets less current liabilities it is so confusing Philip
  • Princess05
    Princess05 Registered Posts: 14 Regular contributor ⭐ ? ⭐
    To be honest Philip I think you need a sound understanding of ebery topic before you can even begin to learn the formulae for any of them as there are so many different ways of methods of calculating them...I'm still struggling with these variances
  • PhilipG
    PhilipG Registered Posts: 26 ? ? ?
    I think you are right - the only thing i find is that if you sit and study for long enough it does seem to fall into place, but like with me on Budgeting - you make a little headway and then bang!! something else doesn't register and studying to me just seems at times to go around in circles
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