Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Financial Performance Variance

awatson86awatson86 Feels At HomeMAAT, AAT Licensed Accountant Posts: 60
I have my Financial Performance exam very soon (last one) and I wondered if anyone had any tips for remembering the variance calculations? I am fine with everything else in this unit but keep having to look back at the workings to calculate the variances on the questions especially the fixed overhead ones. I just can't get them to sink in! Any help would be much appreciated. Thanks in advance!

Comments

  • Jo ClarkJo Clark Font Of All Knowledge Registered Posts: 2,525
    Hello

    I'm still studying this unit and have just covered variances so am trying to get them 'set in stone' in my mind ready for the exam. However in answer to your post, my tutor advised that rather than learn the formula by rote try to apply an example to each and try to recall those in the exam. I know that rote learning is sometimes seen as necessary however I think what my tutor suggested was a very good suggestion and I hope to be able to apply this over the coming weeks before my exam.

    Good luck with your exam.


    JC
    ~ An investment in knowledge always pays the best interest ~
    Benjamin Franklin
  • stephleedzstephleedz Well-Known Registered Posts: 179
    I did my exam on 10th Jan and am I yet to receive my results however I used flash cards and wrote the formula for the labour variance on one, material variance on another and the fixes overheads on another etc. I don't know whether I passed or failed yet but here's how I learnt them: breaking them down.

    Expenditure Variance is straight forward:

    Actual Fixed Overheads - Budgeted Fixes Overheads

    Volume Variance:

    Budgeted overhead (budgeted production x hrs per unit x standard rate)
    -
    Actual production x hrs per unit x standard rate

    Capacity variance

    Budgeted Overhead (budgeted production x hrs per unit x standard rate)
    -
    Actual hrs worked x standard rate

    Efficiency Variance

    Actual hrs worked x standard rate -
    Standard hrs for Actual production x standard rate.

    I hate to say it but you just have to go over and over them.

    Thanks

    Steph
  • awatson86awatson86 Feels At Home MAAT, AAT Licensed Accountant Posts: 60
    Thanks for your advice
  • nonmugglesuenonmugglesue Feels At Home Registered Posts: 39
    It took me ages to get this. I used:

    A=Actual
    B=Budget
    S=Standard

    Qty £
    A - B
    A - AxB
    AvB - AxBxStd


    The Fixed Overhead one was horrible and I used:

    Expenditure = AxA - BxB
    Volume = BxB - SxB
    Capacity = BxB - AxB
    Efficiency AxB - SxB

    The key to this is that you cannot calculate the Efficiency unless you are given the Direct Labour Hours

    It probably makes no sense but I eventually got it, the key is to do a standard cost card
Sign In or Register to comment.