CIMA -Managerial Paper P1 (Mgt Accounting - Performance Evaluation) - Pg 236Planning Variance: or revision variance - campares an original standard with arevised standard that would have been used if the planner had known what wasto happenOperational Variance: or Operating variance - compares an actual results withrevised standardExample 6.2:At the beginning of 20x0, WB set a standard marginal cost for itsmajor product of $25 per unit. The standard cost is recalculatedonce a year. Actual production cost during August 20x0 were304000, and actual units 8,000 producedWith the benefit of hindsight, the management of WB realized thatrealistic standard cost for current conditions would be $40 per unit.The planned Standard cost of $25 is unrealistically low.Required: Calculate the total planning and operational variance
Planning Variance:
Standard Cost (8,000 x $ 25) 200,000Revised Standard (8,000 x $ 40) 320,000Planning Variance 120,000
Operational variance:
Revised Standard (8,000 x $ 40) 320,000Actual Cost 304,000Operational Variance 16,000Total Variance 104,000Tradtional Variance:Standard Cost (8,000 x $ 25) 200,000Actual Cost 304,000104,000
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