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ACCA F5

Performance Management (PM)

业绩管理

ACCA Lecturer Kimberley Gong

Copyright © ACCAspace.comACCAspace 中国ACCA特许公认会计师教育平台 2

1

2

Material mix and yield variances

Sales mix and quantity variances

Content of chapter 16

3 Planning and operational variances


Further variance analysis


Materials

Total variance

Price variance Usage variance

Mix variance Yield variance

• A product contains more than one type of material and they are interchangeable.•A mix variance is used to monitor the difference proportion of raw material.•A yield variance is used to monitor the effect of input on the different level of output to the standard.




Interpretations of material mix and yield

variances

Mix variance –an adverse total mix variance would

suggest that a higher proportion of an expensive

material is being used.

Yield variance –an adverse total yield variance

would suggest that less output has been achieved

for a given input. The total input in volume is more

than expected for the output

achieved.(Unproductively)


Lecture example 1

A company manufactures a type of chemical

product, using two components Flash and Bang.

The standard materials usage and cost of one unit

of the product are as follows:

In a particular period, 80 units of the product were

produced from 600kg of Flash and 750kg of Bang.

Required: Calculate the materials usage, mix and

yield variances.


Lecture example 1

Materials usage

Std. Usage

Actual usage

Variance Std. cost/kg

Total variance

Flash 5X80=400 600 200(A) $2 400(A)

Bang 800 750 50(F) $3 150(F)

250(A)

Actual Qty Std. Mix

Actual Qty Actual Mix

Variance Std. cost/kg Total variance

Flash 450 600 150(A) $2 300(A)

Bang 900 750 150(F) $3 450(F)

1350 150(F)

Material Mix Variance


Lecture example 1

Std. Qty Std. Mix



Flash 400 450 50(A) $2 100(A)

Bang 800 900 100(A) $3 300(A)

400(A)

Material Yield Variance




Sales

Total variance

Price variance Volume variance

Mix variance Quantity variance

Sales mix varianceIt indicates the effect on changing the proportion of the various products sold is different from those in the budget.Sales quantity varianceIt indicates the effect on selling a different total quantity from the budgeted total quantity.




Interpretations of sales mix and quantity

variances

–Sales mix variance

It indicates the effect on changing the proportion of

the various products sold is different from those in

the budget.

–Sales quantity variance

It indicates the effect on selling a different total

quantity from the budgeted total quantity


Lecture example 2

Just Desserts Limited makes and sells two products, Chocolate Crunch and Strawberry Sundae. The budgeted sales and profit are as follows.

Actual sales were 280 units of Chocolate Crunch and 630 units of Strawberry Sundae. The company management is able to control the relative sales of each product through the allocation of sales effort , advertising and sales promotion expenses.

Required

Calculate the sales volume variance, the sales mix variance and the sales quantity variance.


Lecture example 2

Actual Qty Std. Mix



CC 520 280 240(A) $5 1200(A)

SS 390 630 240(F) $3 720(F)

910 480(A)

Budgeted sales

Actual sales

Difference Std. profit/unit

Total variance

CC 400 280 120(A) $5 600(A)

SS 300 630 330(F) $3 990(F)

390(F)

Sales Volume Variance

Sales Mix Variance


Lecture example 2

Std. Qty Std. Mix



CC 400 520 120(F) $5 600(F)

SS 300 390 90(F) $3 270(F)

870(F)

Sales Quantity Variance



Planning and operational variances



Planning and operational variances

Planning and operational variances for sales


Lecture example 3

KSO budgeted to sell 10,000 units of a new product

during 20X0. The budgeted sales price was $10 per

unit, and the variable cost $3 per unit.

Actual sales in 20x0 were 12,000 units and variable

costs of sales were $30,000, but sales revenue was

only $5 per unit. With the benefit of hindsight, it is

realised that the budgeted sales price of $10 per

unit was hopelessly optimistic, and a price of $4.5

per unit would have been much more realistic.

Required: Calculate planning and operational

variances for sales price


Lecture example 3

Planning

$/unit

Original selling price 10

Revised budget selling price 4.5

5.5

Total sales price planning variance 5.5X12000 = 66000(A)


Lecture example 3

Operational

$/unit

Actual price 5

Revised price 4.5

Variance 0.5(F)

Total sales price operational variance 0.5X12000 = 6000(F)



Planning and operational variances for materials


Lecture example 4

The standard materials cost of a product is

5kgs×$7.50 per kg = $37.50. Actual production of

10,000 units used 54,400 kgs at a cost of $410,000.

In retrospect it was realised that the standard

materials cost should have been 5.3 kgs per unit at

a cost of $8 per kg.

Required

Calculate the materials planning variances in as

much detail as possible.


Lecture example 4

Materials price planning variance

—54400X（8 – 7.5） = 27200(A)

Materials price operational variance

—54400 X 8 – 410,000 = 25200(F)

Materials usage planning variance

—10000X(5.3 - 5)X 7.5 = 2500(A)

Materials price operational variance

—(54400 – 10000X5.3)X7.5 = 10500(A)



Planning and operational variances for labour



Labour planning variances and the learning curve

a. Establish an original labor cost per unit, even

though a learning effect exists

b. Revise the standard by learning curve formula at

the end of the budget period

c. Calculate planning and operational variances for

labor. Note the labour efficiency planning variance

will always be favourable



Advantage Limitation

Highlight controllable and non-controllable costs

Difficulty in setting realistic standards

Motivate managers as they will not be accountable for poor plannings set

Employees may excuse operational problems as poor planning

More realistic and fair reflection of actual performance

Time consuming

Budgets should not be revised for operational issues

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