FPFM Financial Performance  AAT Sample Assessment 1  Task 5  Index Numbers
eddzter1978
Registered Posts: 6
Hello All,
Could someone help me please. I thought I had index numbers ok in my head, but task 5 of the FPFM sample assessment 1 on the AAT website has completely thrown me.
It says Keta operates a standard costing system and uses raw material C2X which is a global commodity. The standard price was set based upon a market price of £450 per litre when the material price index for C2X was 120.50. The following information has been gathered:
 the price index increased to 126.525 in June X3
 the raw material price variance for June was £375,000 adverse
 12500 litres of material C2X were purchased in June.
It then asks you to complete the following statements:
a  The part of the variance explained by the increase in the price index is  £
b  The part of the variance not explained by the increase in the price index is  £
The answers are a) £281,250 and b) £93,750 but I cannot work out how to get to these figures.
Any help would be most appreciated.
Thanks
Ed
Could someone help me please. I thought I had index numbers ok in my head, but task 5 of the FPFM sample assessment 1 on the AAT website has completely thrown me.
It says Keta operates a standard costing system and uses raw material C2X which is a global commodity. The standard price was set based upon a market price of £450 per litre when the material price index for C2X was 120.50. The following information has been gathered:
 the price index increased to 126.525 in June X3
 the raw material price variance for June was £375,000 adverse
 12500 litres of material C2X were purchased in June.
It then asks you to complete the following statements:
a  The part of the variance explained by the increase in the price index is  £
b  The part of the variance not explained by the increase in the price index is  £
The answers are a) £281,250 and b) £93,750 but I cannot work out how to get to these figures.
Any help would be most appreciated.
Thanks
Ed
1
Comments

Hello,
The standard was 12,500 litres @ £450 = £ 5,625,000
We know there an adverse variance of £ 375,000
Therefore the actual cost must of been £ 5,625,000 + £ 375,00 = £ 6,000,000
The actual cost per litre £ 6,000,000 / 12,500 litres = £ 472.50
If we reindex the cost per litre to current figures £ 450/120.50*126.525 = £ 472.50
So,
Variance not explained by indexing = £ 480  £ 472.50 * 12,500 litres = £ 93,750
Variance expained by indexing = £ 22.50 (£ 472.50  £ 450) * 12,500 litres = £ 281,250
Feeling helpful Hope this correct
0 
Oops, actual cost per litre is £ 480  the rest looks ok :P0

Thank you so much! Amazing.0

what about how to calculate the percentage task 1.5 (q) C
0
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