Financial Performance

jo21977

I'm retaking this CBA tomorrow and I'm struggling to find what the dominant factor is for section 2. It came up in the previous exam and it wasn't something that we covered in class and I cannot find it in any of my text books??

Also, is there any easy way to remember the overhead variances? I seem to have real trouble remembering how to calculate them although I do understand what they are for!!

Thanks

pirate

Hi jo21977
On variances I just learnt the formulas and when I got into the exam I just wrote them down as soon as I could.
Having said this I did get one of them wrong during the exam but still passed.

What is the problem with the dominant factor exactly, isnt this just which is the main reason for the variances, unless I am forgetting something

jo21977

You may be right! It has come up in the second part of the paper and several of us in my class were unsure if it was as simple as that as we didn't really cover it.

With the variences, I have tried all sorts of methods but nothing seems to stick:(

pirate

With the variances most of some of them are quite easy to think of
In my osbourne book they had PAUS
Price variances are based on
Actual Quantities but
Usage variances on
Standard prices.

this works for Labour and Materials (usage in labour is called efficiency)
Price is always looking at price and cost

So Direct Material Price Variance = Std cost of the ACTUAL QUANTITY less the actual cost of the ACTUAL QUANTITY used.

Usage variances are looking at the amounts of materials
So what did we budget to use versus what we actually used and this is expressed as a cost so uses the standard price.

The total of Price Variance and Usage variance = total variance between what was budgeted to cost and what it actually cost
By breaking it down between the price and the usage we can sort of find out where the problem lays.

There was a really good article in one of the AAT magazines about variances and I think also there