help needed for sub-division of variances

Re:help needed for sub-division of variances

The PEV exam often asks you to split one variance into component parts.

Say your original work has identified a large material price variance and the purchasing manager is preening himself claiming how wonderful he is.

You may then be told that the standard price per kilogram of material was set a year ago and that the market price has fallen since then.

So, you need to set a revised price based on the latest information.

You can then find:-

1. The part of the material price variance which is due to the market price having fallen

and

2. the part due to the work of the purchasing manager's own efforts

You can calculate the sub-vaiances:-

1. would be the difference between the original standard price and your revised price, time the actual kilograms purchased

2. would be the cost that you would have paid for the actual kilograms bought at the revised price and the actual amount paid

I look at this on revision days

see these links
Bath PEV Sunday 28 May
http://www.aat.org.uk/forums/posts/list/11441.page

Croydon PEV Sunday 4 June
http://www.aat.org.uk/forums/posts/list/11439.page

Mansfield PEV Saturday 10 June
http://www.aat.org.uk/forums/posts/list/11440.page


sandy.hood@chichester.ac.uk