Variances - tech level

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone give me any tips on how to learn the variance calculations for direct costs and fixed costs. My brain is done in trying to learn them. Is there any easy way? I know PAUS but that only gets me so far. Thanks.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Variances - tech level

    MissL<BR>I would be very cautious about using short cuts with the variances. If you forget even the smallest part on the day of the exam, you are left without anything.<BR>I strongly recommend that you look at what each variance is showing, and then you can see where it comes from<BR>For example<BR>1. Material usage variances show the difference between the actual material INPUT and the standard materials needed for the actual OUTPUT.<BR>If a cake maker produced 100 cakes and each cake has a standard flour content of 500g, but she actually used 55kg you have the basis of the calculation. If I add a standard cost per kg of flour of £0.12, then we can work this out.<BR><BR>Standard material need for 100 cakes = 50kg<BR>Actual material used 55kg<BR>So 5 kg more than standard were used this is worth at standard cost<BR>£0.12 x 5kg = £0.60 and would be an adverse variance<BR><BR>Think about it as a series of entries in the accounts<BR>Stores issue 55kg at £0.12 to the work in progress<BR>so credit stores £6.60<BR>and debit work in progress £6.00<BR>leaving material usage variance with a debit of £0.60 <BR><BR>I know that quite a few students are happier with this understanding based approach rather than the short cuts way of doing things. But MissL, that is up to you<BR><BR>Good luck, and if you would like further examples just send me an email<BR><BR>Sandy<BR><BR>sandy.hood@chichester.ac.uk<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Variances - tech level

    Hi<BR><BR>Although I totally agree with Sandy, I always struggled with variances and know a super short cut that hopefully<BR>did me proud in my tech exams. Roll on tomorrow!<BR><BR>Post your email address and I'll let you have it.<BR><BR>Clare<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Variances - tech level

    She_is_out_for_the_day@yahoo.com<BR><BR>Thanks Clare. Also, thanks Sandy. I understand a bit better now.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Variances - tech level

    Would you mind sending it to me aswell,<BR>Sorry to be a pain<BR><BR>vicki@logisticplanning.co.uk<BR><BR>Thanks<BR><BR>Vics'<BR>x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Variances - tech level

    Hi<BR><BR>Last year I felt just the same as you do about variances and I searched this site daily for help!<BR><BR>Then I found this on here:<BR><BR>V S B (volume = std x budgeted)<BR>E S A (efficiency = std x actual)<BR>C B A (capacity = budgeted x actual)<BR><BR>To remember it - think of a noughts and crosses grid, <BR>put the three letters V volume E efficiency C capacity under each other<BR>then in the next column put S standard in the two 'upper' rows,<BR>move to the right and put A actual in 'lower' two rows <BR>the two gaps are filled by B budgeted.<BR><BR>I used this in the exams and got through them first sitting (and I've just heard that I passed the Technician exams too - so well chuffed!!)<BR>

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