Revising standards

Question 1

in practice what actually happens to standards

Answer 1

they are usually revised once a year to allow for changes in wage rates, material prices and expected changes in efficiency

Question 2

what should the salesman not be rewarded for

Answer 2

salesman is only in control of any market share growth and should not be rewarded for market growth

Question 3

what does a planning variance do

Answer 3

a planning variance compares an original standard with a revised standard, that should or would have been used if planners had known in advance what was going to happen

Question 4

what does an operational variance do

Answer 4

an operational variance compares an actual result with the revised standard

Question 5

equation for conventional variance

Answer 5

planning variance + operational variance = conventional variance

Question 6

what is a budget

Answer 6

a budget is a quantified monetary plan for a future period which managers try to achieve

Question 7

what is a standard

Answer 7

a standard is a carefully predetermined target which can be achieved in certain conditions and is often used to measure and reward the workforce

Question 8

how do you work out planning variance

Answer 8

compare the original standard with the new standard,

eg 2.4kg x £2/kg x 100 units compared with 2.3kg x 2.50/kg x 100 units

Question 9

what can conventional variance be split up into

Answer 9

operational variance and planning variance

Question 10

how do you work out operational variance

Answer 10

compare actual results with new revised standard

Question 11

how do you work out operational usage variance

Answer 11

amount that should have been used compared with amount that was used, valued at the REVISED standard cost

Question 12

how do you work out operational price variance

Answer 12

difference between what we paid and what we should have paid according to the revised standard

Question 13

if the revised standard is higher than the original standard then what is the planning variance

Answer 13

adverse (in terms of planning they have got it wrong and it’s more expensive so it is adverse)

Question 14

what can operational variance be split up into

Answer 14

price and usage,

rate and efficiency

Question 15

what are some differences between budgets and standards **

Answer 15

budget planned total cost for activity or department, standards show unit resource usage and cost for single task,
budget can be prepared for all functions even where output not measured, standards are limited to situations where repetitive actions are performed and output is measured,
budgets are expressed in money terms, standards need not be (although often are)

Question 16

what is an operational variance (difference between revised standard and actual results) basically saying

Answer 16

this is what should have been achievable taking into account everything we know now (cause have looked back and changed to account for differences that were not foreseen by the original standard)

Question 17

what does the planning variance (comparing original standard with revised standard) basically say

Answer 17

the revised standard is the one that should or would have been used if managers had known in advance what was going to happen

Question 18

how do you work out market size variance **

Answer 18

calculate weighted average contribution,
budget units sold,
budget share of total market (so like 25% of larger figure cause market grown),

multiply the difference between these by the av cont per unit (elq14, 23) confusing cause not any actual figures

Question 19

how do you work out market share variance **

Answer 19

difference between what market share you should have and what you actually have in units (based on what market share is in the standard) and then multiply that by average contribution per unit

Question 20

how do you work out mix variance **

Answer 20

compare actual total sales x weighted average contribution per unit with actual sales for each product multiplied by standard contribution for each individual unit (not average of all)

Question 21

how do you work out sales quantity variance **

Answer 21

difference between actual total units sold and budgeted total units sold,
multiplied by the average contribution per unit from the standard

Question 22

what do mix, volume, quantity, size and share all value the difference at

Answer 22

mix=individual contribution,
volume=individual contribution,
quantity=average contribution per unit,
size=average contribution per unit,
share=average contribution per unit