9609 · 5.5.2
Variances flashcards
Revision flashcards for Cambridge 9609 Variances (syllabus 5.5.2). Flip, recall, then mark a real past-paper question.
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Variance formula?
Variance = Actual − Budget (for both costs and revenue).
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Favourable cost variance?
Actual cost < Budget cost - spent less than planned (F).
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Adverse cost variance?
Actual cost > Budget cost - overspent (A).
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Favourable revenue variance?
Actual revenue > Budget revenue - sold more or higher price (F).
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Adverse revenue variance?
Actual revenue < Budget - underperformed vs plan (A).
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Cause of adverse material cost?
Higher prices, waste, inefficiency, unfavourable exchange rate.
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Cause of favourable labour cost?
Higher productivity, lower wage rates, less overtime than planned.
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Management response to adverse variance?
Investigate root cause; revise budget; improve processes; supplier negotiation.