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PM > Chapter 12- Advanced Variances > Flashcards

Chapter 12- Advanced Variances Flashcards

1
Q

What is variance analysis?

A

Process by which the total difference between standard and actual results is analysed

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2
Q

What are the 2 sales variance calculations?

A

Sales price variance
Sales volume variance

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3
Q

What is the calculation for the sales price variance?

A

Actual quantity sold x Actual price
Actual quantity sold x standard price

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4
Q

What is the calculation for sales volume variance?

A

Actual quantity sold x standard margin
Budget quantity sold x standard margin

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5
Q

If there is a favorable variance in sales price what does this mean?

A

Price increases due to:
Higher customer demand
Lower than anticipated demand for competitors products
Improved quality or performance

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6
Q

If there is a favorable variance in sales volume what does this mean?

A

Increase in demand due to:
A lower price
Improved quality or performance
A fall in quantity or performance of competitors products
Successful marketing campaign

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7
Q

If there is an adverse variance in sales price what does this mean?

A

Price decrease due to:
Lower than anticipated customer demand
Higher than anticipated demand for competitors products
Reduction in quality or performance

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8
Q

If there is an adverse variance in sales volume what does this mean?

A

Fall in demand due to:
Higher prices
Lower quality
An increase in quality from competitors
Unsuccessfully marketing campaign

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9
Q

What are the 2 material variances?

A

Materials price variance
Materials usage variance

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10
Q

What is the calculation for finding the material price variance?

A

Actual quantity bought x actual price
Actual quantity bought x standard price

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11
Q

What is the calculation for finding the material usage variance?

A

Actual quantity used x standard price
Standard quantity used for actual production x standard price

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12
Q

What would cause a favorable materials price variance?

A

Poorer quality materials
Discounts for buying in bulk
Cheaper supplier
Incorrect budget

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13
Q

What would cause a favorable materials usage variance?

A

Higher quality materials
More efficient use of material
Change is product specification
Incorrect budgeting

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14
Q

What would cause a adverse materials price variance?

A

Higher quality materials
Change to a more expensive supplier
Unexpected price increase
Incorrect budget

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15
Q

What would cause a adverse materials usage variance?

A

Poorer quality materials
Less experienced staff using more materials
Change in product specification
Incorrect budgeting

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16
Q

What are the 2 labour variances?

A

Labour rate variance
Labour efficiency variance

17
Q

How do you calculate the labour rate variance?

A

Actual hours x actual rate
Actual hours x standard rate

18
Q

How do you calculate the labour efficiency variance?

A

Actual hours x standard rate
Standard hours for actual production x standard rate

19
Q

What would cause a favorable labour rate variance?

A

Lower skilled staff
Cut in overtime bonus
Incorrect budgeting

20
Q

What would cause an adverse labour rate variance?

A

Higher skilled staff
Increase in OT or bonus
Unforeseen wage increase

21
Q

What would cause a favorable labour efficiency variance?

A

Higher skilled staff
Improved staff motivation
Incorrect budgeting

22
Q

What would cause an adverse labour efficiency variance?

A

Lower skilled staff
Fall in staff motivation
Incorrect budgeting

23
Q

Material mix and yield variances are calculated if..?

A

A product contains more than one type of material
These materials are interchangeable

24
Q

What are the 2 material variances?

A

Material price variance
Material usage variance

25
Q

What are the 2 variances within materials usage variance?

A

Material mix variance
Material yield variance

26
Q

What does material mix variance measure?

A

The impact on profit of a change in the mix of materials

27
Q

What does the material yield variance measure?

A

Measures the impact on profit of a different output being produced from a given input than standard

28
Q

What is a mix variance used for?

A

To monitor the cost of material

29
Q

What are some problems when calculating mix and yield variances?

A

Should only be used when the kid is controllable
It is often found that the mix and yield variances are interdependent

30
Q

What are the 2 variances with sales mix and quantity’s?

A

Sales price variance
Sales volume variance

31
Q

What are the 2 variances within sales volume variance?

A

Sales mix variance
Sales quantity variance

32
Q

What does a sales mix variance indicate?

A

The effect on profit of changing the mix of actual sales from the standard mix

33
Q

What does the sales quantity variance indicate?

A

The effect on profit of selling a different total quantity from the budgeted total quantity

34
Q

How do we calculate operation variance?

A

Actual sales units x standard margin
Revised budgeted sales x standard margin (to achieve target of actual market)

35
Q

How do we calculate planning variances?

A

Revised budgeted sales x standard margin (to achieve target of actual market)
Original budgeted sales x standard margin

PM (15 decks)

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