Help - Variance

bspink

I'm really struggling with Variance, material usage variance and labour efficiency variance. My exams on Tuesday and I'm so stuck! I have been trying the practice paper the 1st one on AAT. I don't get how they get the answers for 2b and 2c, idle time I'm ok with just the others. Thanks!

rosiefaith

Hi bspink,

I really struggled with variances. Then I watched this video on youtube and it really helped.
https://www.youtube.com/watch?v=H_wAv0QHlYA

For 1.2 b-
I find out what they did use to what they should have used for actual production.
They did use 200,000 litres
They should have used 190,000 liters. You find this out by flexing - 220,000lts/22000 units = 10 litres per unit. 10 x 19000 actual units = 190,000 litres.
This gives 10,000 litres adverse variance but you want to know the variance in £.
You x the 10,000 by the standard cost per litre. (£132,000/220,000lts = £0.60)
10,000 lts x £0.60 = £6000 adverse.

1.2 c -
Find out what they did work - 6900 hrs
Find out what they should have worked - 7200 hrs (6000 std hrs / 10,000 std units x actual units 12,000 units)
= 300 hrs favourable but what you want to know the variance in £ therefore you times this by the standard cost of £15 = £4500 F

Hope this helps!