C H A P T ER 1 1 – A D V A N C E D V A R I A N C E A N A Y S I S
Pro Forma (using materials variances)
Basic pro forma
Planning
Operational
(substitute actual with
(substitute standard with
revised standard)
revised standard)
SQSP
SQSP
RSQRSP
RSQSP
AQRSP
RSQRSP
AQAP
Usage AQSP Price AQAP
Example 2 Standards 3kg/unit for £5/kg Actual Output
12,500 units
Usage
38,000 kg
Cost
£195,500
Required: Prepare the variances using basic variance analysis and assess whether the purchasing manager and production manager individually have done a good or bad job.
After further consideration the standards have been revised to reflect changes that have occurred over time. The standard usage is now expected to be 3.1kg due to a poor harvest leading poorer quality material inputs. In addition due to adverse movements in the exchange rate the material costs have changed. It is now expected that each kg will cost £5.15. Required: Prepare an analysis of variances into both planning and operational elements and assess the performance of the purchasing manager and the production manager individually.
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