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F5 Performance Management December 2010 - Answers

F5 Performance Management December 2010 - Answers

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ACCA F5 Final Mock Answers
ACCA F5 Final Mock Answers

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Published by: M. Essmaeel Ali Jami on Dec 10, 2010
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ACCAPaper F5Performance ManagementDecember 2010Revision Mock – Answers
To gain maximum benefit, do not refer to these answersuntil you have completed the revision mock questionsand submitted them for marking.
ACCA F5 Performance Management2 KAPLAN PUBLISHING
© Kaplan Financial Limited, 2010The text in this material and any others made available by any Kaplan Group company doesnot amount to advice on a particular matter and should not be taken as such. No relianceshould be placed on the content as the basis for any investment or other decision or inconnection with any advice given to third parties. Please consult your appropriateprofessional adviser as necessary. Kaplan Publishing Limited and all other Kaplan groupcompanies expressly disclaim all liability to any person in respect of any losses or otherclaims, whether direct, indirect, incidental, consequential or otherwise arising in relation tothe use of such materials.All rights reserved. No part of this examination may be reproduced or transmitted in anyform or by any means, electronic or mechanical, including photocopying, recording, or byany information storage and retrieval system, without prior permission from KaplanPublishing.
Revision Mock AnswersKAPLAN PUBLISHING 3
(a) The meaning of each of the five variances is explained below:
Material price variance
This is the difference between what the material did cost and what the materialshould have cost (based on pre-established standards). It will be the sum of theindividual material price variances.
Material mix variance
A mix variance occurs when the materials are not mixed in the standard proportionsand, as result, the actual mix will be cheaper or more expensive than the standardmix. For example, sugar may be cheaper than cream. Using more sugar and less creamwould result in a favourable mix variance.
Material yield variance
A yield variance arises because there is a difference between the expected input andthe actual input required to achieve the actual output.
Sales price variance
This measures the effect of a selling price that is different to the standard selling price.It is calculated as the difference between what the sales revenue should have been forthe actual volume sold, and what it was.
Sales volume contribution variance
The sales volume variance measures the increase or decrease in expectedcontribution as a result of the sales volume being higher or lower than budgeted. It iscalculated as the difference between the budgeted sales volume and the actual salesvolume multiplied by the standard contribution per unit.(b)
Purchasing manager
The purchasing manager will have responsibility for selecting suppliers and purchasingactual supplies. As a result, he will have an influence over the following variances:
Material price variance
The purchasing manager has been able to achieve afavourable variance in the first three quarters. This is probably due to him choosingalternative and cheaper suppliers and due to negotiation of bulk discounts withexisting suppliers. These favourable variances should be linked to the bonus that hereceives since they are within his control.However, the material price variance is adverse for the final quarter of 2008. Thenational shortage of eggs has pushed up prices and contributed to the adverse pricevariance. Therefore, he should not be evaluated on this variance since he was unableto control the price increase.
Material yield variance
It could be argued that the purchasing manager has someinfluence over the material yield variance. For example, if the purchasing managerbuys poorer quality material then the production manager will be forced to use these.

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