# Financial Performance HELPPPPPPP

Registered Posts: 15 Dedicated contributor 🦉
Hi everyone

I have looked at question 1.3 on practice cbt4 and cant seem to come back to the answer on the cbt answers of £1500 Fav

We're given

Budgeted O/H £52,000
Budgeted output 2,600 units and 10,400 labour hours
Actual output 2,800 units and 10,900 labour hours
Actual O/H's £46,500

my workings

how many hours it should take to make 1 unit 52,000 / 2600 i.e. £20 labour hour per unit

Then I multiply the actual units 2800 by this standard 20 = 56,000 hours
Then I write down how many hours it actually took here its 10900 hours
Work out the difference = 45100 hours (fav)

work into pounds = absorption rate here its £52,000 fixed OH divided by 10400 labour hours = £5.00 per labour hour

The difference 225500 hours

• Registered Posts: 165 Dedicated contributor 🦉
Hi

I take it you are looking for the Efficency variance?

I have worked it out by first working out the BOAR hours which is Budgeted hrs / Budgeted units
10400/2600 = 4 hrs per unit

and then the BOAR Per hour rate like you I get £5.00

So then take your actual hrs 10400 x £5.00 BOAR Per Hr = £54500

then work out the actual units x bud hrs x BOAR ph which is 2800 x 4hrs = 11200 hrs x £5 = £56000

Take £56000 from £54500 and you have the Favourable variance of 1500

Hope this helps.
• Registered Posts: 422
Hi Priti,

This is the formulas I use to work out the efficiency and capacity variances.

Fixed Overhead efficiency variance = OAR(SHAOUT-AHT)

Overhead absorption rate = 52000/10400= which is yes 5

SHAOUT= 10400/2600*2800= 11200 You need to flex the standard hours with actual output.

AHT = 10900

Put into formula 5(11200-10900)= 1500 Favourable

OAR we have already worked out as 5

AHT = 10900

SHT= 10400

Put into the formula 5(10900-10400)-2500 Favourable

I have my fnp retake on wednesday and these formulas are so far working for me :thumbup1:

Hope this helps

Aaron
AAT

Level 2 - 2010
Level 3 - 2011
Level 4 - 2013

ACCA

F4 - 2015
F5 - 2015
• Registered Posts: 15 Dedicated contributor 🦉
Hi guys

thank you so much, i understand both examples much appreciated.

Aaron quick question what does SHAOUT-AHT stand for

Good luck for your exam on wednesday, hope it goes well xxxxxxxxx

Thanks
Priti
• Registered Posts: 422
Thanks Priti!

I'm feeling a lot more confident now especially since AAT have started providing 4 practise assessments instead
of 2, I'm not complaining
Please have a look at my post in this link hopefully should help to explain, http://forums.aat.org.uk/showthread.php?35050-FNPF-struggle...... I know a fair few people who have passed using these formulas so it does work, if you're

Aaron
AAT

Level 2 - 2010
Level 3 - 2011
Level 4 - 2013

ACCA

F4 - 2015
F5 - 2015
• Registered Posts: 165 Dedicated contributor 🦉
Good luck Aaron

I also have my resit Wednesday afternoon, and am so nervous! I haven't done the CBA's yet so didn't realise they had 4 for us to have a crack at, so thats brilliant.

My way to work out variances was taught at college and a bit difficult to explain on here, so hope I haven't confused.
We were taught A x A, A x S & S x S. Its a really neat way and I have it firmly set in my brain.
Just as long as all ways give you the same outcome it doesn't really matter.

This is my last exam before I qualify so am really hoping I get a good paper this time around. Lol

Good luck again, Priti when is your exam? Good luck too if its fairly soon x
• Registered Posts: 422
Thanks Jane! Good luck to you also

Yeah I completely agree, use the technique which you feel comfortable with and if you're getting the correct
I've jumped straight into the cbts as I've only started revising today :blushing: But I'm mainly focusing on practise
cbt 3 & 4, some of the questions which I couldn't answer in my actual exam now seem to be covered in practise
assessment 3 & 4 which is always a positive sign :thumbup1:
AAT

Level 2 - 2010
Level 3 - 2011
Level 4 - 2013

ACCA

F4 - 2015
F5 - 2015
• Registered Posts: 15 Dedicated contributor 🦉
Thanks Aaron - will defo look at the link and will come back to you guys if i require more help.

Jane - i have booked the exam for Jan 17th so i do have a month or so.

Good luck to you both fingers cross all goes well with you both and again thank you for your help, both methods are very helpful.

:001_smile:
• Registered Posts: 283
I think there is a much simpler and in my view quicker way of working this out.
First of all volume variance will equal capacity and efficiency variance.
Now volume is worked out with the units and capacity is worked out using labour hours.
So 52000/2600x2800=56000 so the volume variance is 56000-52000=4,000 fav Becuase more units were produced.
capacity 52000/10400x10900=54500 so the capacity variance is 54500-52000=2500 fav because more hours were worked.
If volume = capacity+efficiency.
then 4000=2500+1500
in some cases we may have an adverse and fav outcome so its a matter of doing the sums and this ay you know you have the right answer.