Dear All
I would be thankful if any of you could let me know that whether belowmentioned formulaes of standard costing are correct or not (am talking about non conventional method)::confused:
Price Planning Variance = (Std. Rate-Revised Std. Rate)* Standard Quantity on revised standard
Usage Planning Variance = (Std. Qty.- Revised Std. usage)*Std. Price
Price Operating Variance = (Prevailing Rate/Revised Std. Rate-Actual Rate)* Actual Quantity
Usage Operating Variance = (Std. usage based on revised std.-Actual Qty.)*Revised Std. Price
Regards
Parag Gupta

I don't know about the standard versus revised standard. Looks like on the planning one, you might be comparing an original plan versus a revised plan?? If that's what you're comparing, then the planning variances look correct.

I'm not sure I understand the other one. Are you comparing the revised costs and usage, to actual costs and usage? (i.e. the original, unrevised standards from the planning variances are no longer relevant?)

Dear Morgaine300
Thanks for your reply, but I would be thankful if you could help me by quoting formulaes which you feel are correct to calculate planning & operation variance. This will help in comprehending your words in more clear way.
Regards
Parag Gupta

Hmm... well, my words don't really have much to do with the formulas. I was actually just asking for some clarification on all the actual vs revised, etc. so that I could interpret your equations a bit better.

The basic variance formulas are:
price/cost variance = (standard price/cost - actual price/cost) * actual quantity/usage
quantity/usage variance = (standard quantity/usage - actual quantity/usage) * standard price/cost

As you can see, different words can be used because they can be applied to different things. But basically, one is the dollar amount and the other is the quantity of some sort, regardless of what you call them. But, this is also based on an original standard versus an actual figure.

You seem to be using them to compare an original with a revised, a use I've never seen. (Hence, being non-conventional I guess. :-)) And then I guess you're comparing the revised with the actual. To me, math is math, so I can apply this to anything if I understand what I'm applying it to. So I was trying to "get" what you were attempting to do here.

When I first looked at it, it looked like your price planning variance was incorrect, because it said "*standard quantity." But in looking at it further, it looks like you're comparing an original standard with a revised standard. In my equations, that would make "standard on revised" the same as "actual" for the planning portion. If that makes sense. So I think it's all actually correct.

Are you following any of this jibberish? :-)

I'm just curious -- what type of business is this for? Despite the fact that any place can revise things, seeing that word "revision" makes construction/contracting-related work pop in my head. I once worked for an electrical contractor and I think that word "revision" just got pounded into my head that way and I can't seem to get rid of it. LOL.

Its not your fault dear.. these are new not the conventional formulaes of standard you are talking about i.e. price variance, usage variance... CIMA, London has provided some new variances. I was talking about those :D

Quote:

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Originally Posted by parag_ca

Its not your fault dear.. these are new not the conventional formulaes of standard you are talking about i.e. price variance, usage variance... CIMA, London has provided some new variances. I was talking about those :D

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Oh my. Well, I'm in the U.S. and I know nothing about London. :-) But your equations really are like the variance equations I was talking about... so certainly easy to assume that's what you were doing. In fact, seems to me it still oughta work, at least mathematically. :-)

But OK... I'll stay out of this one. Hope someone can give you the answer you need.