MANAGEMENT IN DECISION AND CONTROL

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Mannaesi
Mannaesi Registered Posts: 80
in Management Accounting: Decisions and Control
Goodday. i need help on report writing (task 5 of mdcl),anyone who ever exceeded the task?especially the variance analysis report

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  • Emmalouise18
    Emmalouise18 Registered Posts: 237 Dedicated contributor 🦉
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    What part of the question do you need help with?

    Is this the written question where it shows material and labour variances and asks for explanations as to why?

  • Mannaesi
    Mannaesi Registered Posts: 80
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    yes dear@Emmalouise18....this part is giving me a hard time


    Sometimes they tell you that the variance is adverse or favourable and the question being(what lead to a favourable or adverse variance )
  • Mannaesi
    Mannaesi Registered Posts: 80
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    Let me use this question as an example,

    Explain what could have caused the following variances,

    (a)Material usage variance(3marks)

    (B)Labour rate(3)

    (c)Labour efficiency(3)

    (d)fixed overhead expenditure(3)...

    (E)fixed overhead capacity(3)

    f)fixed overhead efficiency(3)
  • Mannaesi
    Mannaesi Registered Posts: 80
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    Let me use the sample assement question on bpp (pg238) AAT AQ2016 sample question but taking question as follows

    Explain what could have caused the following variances,

    (a)Material usage variance(3marks)

    (B)Labour rate(3)

    (c)Labour efficiency(3)

    (d)fixed overhead expenditure(3)...

    (E)fixed overhead capacity(3)

    f)fixed overhead efficiency(3)
  • Mannaesi
    Mannaesi Registered Posts: 80
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    This is the question am talking about
  • Emmalouise18
    Emmalouise18 Registered Posts: 237 Dedicated contributor 🦉
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    Mannaesi said:

    This is the question am talking about


    Hello, I have just replied to you on another comment haha I will post my response again below.

    Hello,

    It took me 4 times to pass this exam. All being a few marks off each time. I personally feel with the written questions there is a method and if you follow the method then you will pass. Written questions need structure to them which is:

    Make your point -> Show evidence -> Use examples -> Explain your examples -> Link back to the question.

    Material Price variance of 25000 favourable could be: Material cost is less than budgeted due to bulk buying, taking advantage of early settlement discounts, cheaper supplier/ poor budgeting. The new efficient machinery is likely to be upto date and therefore use less material per unit so this saves the company money as they don't have to purchase as much material.

    Labour Rate Variance of 1000 favourable could be: Less labour staff due to laying off unskilled workers, which was not budgeted for. This could be incorrect budgeting also by the budget team.

    Material Usage Variance of (7000) Adverse could be: The new machinery may result in a high level of wastage therefore they will use less and waste more. This will not have been budgeted for which is why its adverse.

    Labour Efficiency Variance of (1000) adverse could be: The labour time to produce each unit has risen so its taking longer amount of time to produce each unit which wasn't budgeted for therefore this is why the variance is adverse.

    Fixed overhead expenditure of (7000) adverse: This is due to the new machinery with increased depreciation charge. This will have not been budgeted for.

    Fixed overhead efficiency of (6000) adverse: This is due to less units produced than budgeted for. This could be due to the change over in labour workers also the new machinery that could take longer to produce each unit.


    When answering each written variance question, begin with stating whether the variance is adverse or favourable. Then define what that adverse/favourable variance is. E.g. A material price variance of £5000 favourable happens when the business spends less money on materials than they budgeted for.

    Then go onto to explain reasons why the variances have happened. Use examples and explain the link back to the question (recent activities)

    If you can, link each variance together if possible - this gets you more marks!

    If you need any more help let me know!

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