9609 · 5.5.2

Variances — practice questions

Practice and worked examples for 9609 Variances. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Budgeted labour cost $48 000; actual labour cost $52 500. Budgeted sales revenue $200 000; actual sales revenue $215 000.

Calculate both variances and classify them.

Show solution outline

Labour cost variance = $52 500 − $48 000 = +$4 500 → Adverse (A) - spent more than budgeted.

Sales revenue variance = $215 000 − $200 000 = +$15 000 → Favourable (F) - revenue above budget.

Net effect on profit: need to consider whether higher sales caused extra labour or if inefficiency drove cost overrun - use case details.

Budgeted material cost $30 000; actual $27 600. Case states supplier offered an unexpected bulk discount.

Calculate the variance and explain a likely cause.

Show solution outline

Variance = $27 600 − $30 000 = −$2 400 → Favourable (F) - material costs below budget.

Cause (from case): Bulk purchase discount from supplier reduced unit material cost below the budget assumption.