PEV!!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM in AAT student discussion
Please can any one help!! have past section 2 twice but always mess up my variances. Can any one help with how to remember them or how to do them. Not long now and im so stressed.

Many thanks

Good luck with your exams guys x :)

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV!!

    Price rate variance - cost of actual materials at standard cost less actual cost

    Price Usage - standard volume should have used less actual use

    Labour rate - Cost of actual labour hours at standard rate less actual labour cost

    Labour effiency - Time should have take for actual production less actual time taken x standard cost per hour

    Fixed oh exp - Budgeted overheads less actual cost of overheads

    Fixed oh capacity - Actual hours taken less budget available hours x standard cost per hour of overhead

    fixed oh efficiency - standard time for actual production less actual time taken x standard cost of overhead per hour

    Fixed overhead volume - budgeted volume at standard time less actual volume at standard time x standard time per hour

    Volume variance is a combination of efficiency and capacity variances added together.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV!!


    Most of the variances I am alright on the only ones that give me trouble are volume, effiencey and capicity. For these I try to remember them by initial

    For volume variance VSB for standard hours - budgeted

    Effiencey ESA standard hours - Actual

    Capacity CAB Acutal hours - budgeted

    I don't know if that will help but it does for me.

    Regards

    Kiwi
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV!!

    Hi

    If you have a look at the thread Revision Course PEV/PCR I've put another way to try and remember the variances.

    http://www.aat.org.uk/forums/posts/list/11598.page

    Best of luck
    Eva
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV!!

    09/06/2006 17:59:59
    Re:PEV Dec 2005 paper - Fixed O/H Volume Variance Q - Help needed please (Ellis)


    Hi

    This relates to the December 2005 Paper.

    The only way I can understand fixed overhead variences is as follows. Once you grasp the method all questions seem relatively easy to me.

    Fixed overheads seems to have the following elements;

    SHA - Standard hours of Actual Output * BOAR
    SHB - Standard hours of Budgeted Output * BOAR
    AH - Actual hours used * BOAR

    BOAR being the budgeted overhead absorbtion rate.

    Std hrs based on the way in which the overhead is absorbed ie; labour hrs / machine hrs. If it is absorbed per unit then it would just be the units budgeted and actual * overhead absorbtion rate. Meaning only the expenditure varience could be calculated. But that won't happen!!

    In this case they equal;

    SHA - Actual output 600,000 / batches of 1000
    = 600

    SHB - Budgeted output 560,000 / batches of 1000
    = 560

    AH - Given in question as 6200 labour hrs worked.

    The Budgeted overhead absorbtion rate is 12.00 per labour hr and it takes 10 hrs to produce one batch of 1000.

    SHA - Is 600 Batches * 10hrs per batch *12.00
    or 6000*12.00

    SHB - Is 560 Batches * 10hrs per batch *12.00
    or 5600*12.00

    AH - Question already gives hrs used to produce batches so does not need to be times by 10. Just need to times it by the overhead absorbtion rate per labour hr.
    = 6200*12.00

    This produce's the following figure to be used in the calculations

    SHA - 72000
    SHB - 67200
    AH - 74400

    I then use the following to do the overhead variences

    Volume = SHA - SHB
    Capacity = AH - SHB
    Efficency = SHA - AH

    All I tend to remember is;

    V=SHA-SHB
    C=AH-SHB
    E=SHA-AH

    If the first figure is greater then the varience is Favourable if it is lower then it is Adverse. Once you start using this way you do start to understand more as you know the figures are correct.

    As for Material and Labour variences I use the term PAUS to help me.
    P rice variences are based on
    A ctual Quantitys
    U sage variences are based on
    S tandard costs

    This then helps me to remember what figures I am using for example

    Material Price Varience
    Act Qty * Std Cost
    Act Qty * Act Cost

    Material Usage Varience
    Std Cost * Std Oty
    Std Cost * Act Oty

    As Price variences are based on actual Ouantities I know I use this figure twice, I then basically times it by the Std and Act cost. Although this seems to go the long way around things I find it helps me to ensure I am using the correct figures. Again if the top line is higher the varience is favourable if it is lower it is adverse.

    The same applies to Labour variences you just swap Qty for hrs used.

    This works everytime as long as you calculate them correctly in the first place. I could not understand them at all so give this way a try and see if it helps.

    Fixed Overhead Expenditure Varience is the easy one just Budgeted Overhead - Actual Overhead.

    Louise
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV!!

    Hi,

    Found this the other day which means I will never forget the Fixed Overhead Variances again !

    Silly
    Bloody
    Variance

    Volume = Standard Hrs - Budgeted Hrs x BOAR

    Stamped
    Address
    Envelope

    Efficiency = Standard Hrs - Actual Hrs x BOAR

    A
    B
    C

    Capacity = Actual Hrs - Budgeted Hrs x BOAR

    The Expenditure variance is easy to Remeber - Budgeted cost - Acual cost.

    Hope that this helps !

    Isabel
    x

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