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# variance unit 31

Trusted RegularRegistered Posts: 481
i am bit confused with the actual result withe indexed results variance%
actual 2005 indexed 2004 variance%
sales 3771800 3591492 +5.02%
cost good sold 1909700 1871135 -2.06%
sales and amin 539800 532922 -1.29%
i know the first variance=(3771800-3591492)/3591492*100=5.02%
but not sure why it has negative in other answer, what's the formular to work this? is it not (actual-index)/index*100??:confused1:

• Experienced Mentor Registered Posts: 509
Hi Mei,

What textbook and question are you working on? Im looking at my Kaplan Unit 31 workbook but can't find this question. It is an old copy mind 2007 i think.
• Trusted Regular Registered Posts: 347
Hi

If the percentage variance is negative is usually means that the performance is not as good.

For example Budgeted Turnover is £620,000 and Actual Turnover is £600,100 that means a variance of -£19,900 and percentage variance = -3.21%.
In this example, the turnover is 3.21% below what is budgeted and expected.

I know your example is for the Index figure of 2005 back to 2004 prices, so your negative figures indicate the peformance in 2005 is not as good as 2004 figures (using the index).

I hope I have not complicated things for you!
• Trusted Regular Registered Posts: 481
*Jo wrote: »
Hi Mei,

What textbook and question are you working on? Im looking at my Kaplan Unit 31 workbook but can't find this question. It is an old copy mind 2007 i think.

this is on both bbp and osborne book.
• Trusted Regular Registered Posts: 481
Hi

If the percentage variance is negative is usually means that the performance is not as good.

For example Budgeted Turnover is £620,000 and Actual Turnover is £600,100 that means a variance of -£19,900 and percentage variance = -3.21%.
In this example, the turnover is 3.21% below what is budgeted and expected.

I know your example is for the Index figure of 2005 back to 2004 prices, so your negative figures indicate the peformance in 2005 is not as good as 2004 figures (using the index).

I hope I have not complicated things for you!
but the actual figure 2005 are all higher than the figure in 2004, so why it still has negative, i thought if it's other way around, then it should be negative!
• Trusted Regular Registered Posts: 481
*Jo wrote: »
Hi Mei,

What textbook and question are you working on? Im looking at my Kaplan Unit 31 workbook but can't find this question. It is an old copy mind 2007 i think.
hi, this test is also on aat study zone, specimen test!
• Experienced Mentor Registered Posts: 509
meibaker Quote:
Originally Posted by *Jo
Hi Mei,

What textbook and question are you working on? Im looking at my Kaplan Unit 31 workbook but can't find this question. It is an old copy mind 2007 i think.

hi, this test is also on aat study zone, specimen test!

I;ll have a look tonight if i get chance and hopefully get back to you.
• Trusted Regular Registered Posts: 481
*Jo wrote: »
meibaker Quote:
Originally Posted by *Jo
Hi Mei,

What textbook and question are you working on? Im looking at my Kaplan Unit 31 workbook but can't find this question. It is an old copy mind 2007 i think.

hi, this test is also on aat study zone, specimen test!

I;ll have a look tonight if i get chance and hopefully get back to you.

thanks
• Experienced Mentor Registered Posts: 509
meibaker wrote: »
thanks

Hi Mei,

Sorry i've took too long to get back to you, things kinda took over.

Anyhow back to the question (im assuming you still need help).

The way you worked out the first variance is the right way to work out all of them. The reason there is a negative is because the question states "Favourable variances should be expressed as positive figures; unfavourable variances should be expressed as negative figures." This is telling you to put a - when the variance is not in the company's favour.

The first variance is for Sales. In 2005 the figure was higher than for 2004 therefore a positive or favourable variance and no - is needed.

The second variance is for Cost of Goods Sold. In 2005 the figure is again higher than for 2004 but now we are talking about an expense rather than income so we don't want a higher figure. This is an unfavourable variance This is why the answer has a -. This also is why the variance for other sales and admin costs is a negative.

Back to positive variance on Net profit as this is in the company's favour.

Hope this now makes sense.

Jo

The
• Trusted Regular Registered Posts: 481
thanks jo for getting back to me. i start to think the answers are wrong. lol
yeah, complete understand now, have to read the whole thing not just the figure! ; ) have a nice weekend!x
• Experienced Mentor Registered Posts: 509
I sometimes miss things when i skim read the questions too.

Have a great weekend.

Jo