Variances

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi, Im going to be re-sitting exams in June and want to get started on the revision front, can anyone send me information on Variances!!! I am having real trouble getting these to sink in!

Thanks
Sam

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Variances

    I hated variances when I first did them, but after a while you realise they are not to bad.

    Heres a link about them http://www.accaglobal.com/publications/studentaccountant/256576

    although it didnt seem particuarly good at explaining them, the BPP text book is probably better.

    I found that instead of trying to remember individual formulas just try and think what would be a fair way of calculating.

    FOR EXAMPLE
    what would be a fair way of calculating a material price variance? lets say that the the standard cost was £5 per kg and we planned on using 100kg. This equals a planned total cost of £500.

    During the period it was found we used 110kg and at a total cost of £660.
    This equates to an actual cost per unit of £6.

    So what is a "fair" way to calculate a material price variance? Well simply we have to ignore the amount of material planned, because we are looking at the price and not how many kilograms.

    So the answer is:
    PLANNED COST 110kg * £5 = £550
    ACTUAL COST (for 110kg) = £660
    VARIANCE = £110 (adverse)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Variances

    Thanks for that, i will have a look at the link. These have really done my head in!!!

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