Help-is there an easy way to remember variances

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I cannot remember variances, can some send me an easy way of remembering them.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help-is there an easy way to remember variances

    It depends what area you are talking about. Generally you need to think about what it is you are trying to show.<BR><BR>for eample, if budget for sales is 400000 and the actual is 360000, then we have a situation where we have acheived less sales than we desired/needed. this means that the variance was adverse.<BR><BR>If expenses were budgeted to be 40000 but where in actual 39000 then it would be favourable as we spent less than we anticipated.<BR><BR>And visa verse for both instances.<BR><BR>Now if you are talking fixed overheads, Thats a little bit longer, but if you are I will help if I can. Just try to be reasonably precise in what you are asking so I don't waffle.<BR><BR>Hopefully this has been usefull, if not I apologise.<BR><BR>Mimi<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help-is there an easy way to remember variances

    Hi Mimi<BR><BR>Thanks for replying.<BR><BR>I can't seem to remember variances for overheads.<BR><BR>Materials and Labour are fine.<BR><BR>I am getting confused. I need an easy format to remember what each variance does.<BR><BR>Thanks Tania
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help-is there an easy way to remember variances

    I kinda get a headache trying to remember the Volume (and its sub-) Variance(s). This is how I have overcome it - Volume means how much was produced. Meaning, you compare actual production with budgeted. The important thing to remember once you have worked out the difference in QUANTITY is that you have calculate it into HOURS!! The reason is simple: if the Volume Variance is the sum of Capacity and Efficiency then it has to be on the same basis i.e. hours x Standard O/H absorpion rate.<BR><BR>O/H Capacity deals with the actual and budgeted hours of work. e.g. you are budgeted to work a 35 hour week, but you in fact actually do a 42 hour week!<BR><BR>O/H Efficiency is exactly the same as Direct Labour Efficiency Variance or Direct Material Usage Variance. i.e. you work out how long actual production should have taken and compare it with how long it did take, and you multiply the figure by the Standard O/H absorption rate.<BR><BR>Try and keep things simple. It's kinda confusing at the beginning, but do loadsa questions, mark it to see if you were right, and if not make sure you work backwards - find out why what you did was wrong and DON'T do it again! Good luck in your exam. I'm sitting mine on 29.11.04.

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