I am currently using Becker Review and I am having a hard time remembering how to do the numerous variance questions in B5. There are so many different situations and Im confusing myself. Does anyone have good notes that helped them through the variance part of BEC???

Actual          Actual                  Stnd              Stnd

$                     QTY                       $                   QTY

\-----------------/   \-----------------/    

1.  The difference between

these numbers is price/wage/

VC OH spending variances

                              \------------------/  \------------/

                             2.   Difference between these numbers is

                                usage/ efficiency

There are only 2 variance formulas, and they answer 3 questions each.  It doesn’t matter what the question is asking, if it is DM, DL, or VC OH, these 2 formulas answer the question.

Any variance question asking for price or purchasing info is the first one.  

Any variance question asking for usage (DM, DL, VCOH) is the second one.

When you get a question, set up the table as shown at the top of the page.  Plug in the numbers for actual dollars and QTY and Standard dollars and quantity.  Then ask yourself if its price related (use the formula for 1.) or if it is usage related (use the formula for 2.).

Find difference between the numbers.  Remember that you read from left to right, and that is the right way to read.  If you find the numbers are increasing as you move to the right, then it’s favorable.  If the numbers are increasing as you move from the left to the right, than it’s not the right way to read so it is unfavorable.

FC OH variance is totally different.

Do not try to plug FC variance into these formulas.  As soon as you see the FC in the question, move over to this

Actual                                    Budgeted                       OH                      

OH                                                                                      Applied

 \ -------------------------------/     \-------------------------/

    spending/budget variance           volume variance

Spending/budget variance is the difference between actual OH and what was budgeted.  Remember FC does not change the more you produce, so look for a total number on this like ‘Actual FC OH was XXX.’ And budgeted total FC will be given to you also.

Volume variance is:

Actual quantity produced * Budgeted FC OH dollars

                                               Budgeted activity (DL HRS/Machine HRS/etc)

NOTE:  if you practice this table form while doing the homework, you will start to understand the formulas Becker gives you.  Don't memorize the formulas - set up the table and do it visually.  There is enough to memorize on this test already. 

You must get this nailed down to pass this test.  Trust me on this.

Xalina wrote:  when I was solving chapter 5 questions last night, I was doing so poorly  that I was completely disheartened . It was weird coz I got a good grades in my cost accounting class in college and in fact volunteered to give a presentation on the very same topic So Then I broke out my college textbook and spent a good two hours on it and now I get it. I'd definitely say that Becker does a poor job with explaining variances. Nonetheless, the more questions you practice, the more things will make sense.

I agree.  And I took cost accounting last year and got an A, so I knew it was the materials.

I had to get Yaeger BEC program to prepare for this test.  I thought Becker did a poor job on chapters 3, 4,and 5.  Yaeger put it all into place for me.  I used the tabular form and Yaeger's formulas.

Don't try to figure out Becker's presentation for Fixed Cost variances either.  I was totally lost on that and see most people don't get it either.