Financial Performance Q & A with Jeff Grimston from Premier Training


Good evening everyone, and welcome to the latest ASN FREE Q & A session on Financial Performance with Jeff Grimston from Premier Training. If you have any questions, please post as a comment below. Please be aware, if any questions are left unanswered, then they will be answered at a later time. And thank you all for participating…..now over to you, who has the first question?

Comments
Suzanna Rich

Suzanna Rich And what are the main differences in this topic between 2013 and 2016 standards?

Jeff Grimston

Jeff Grimston Not much in budgeting, just looking for our list for FP

Jeff Grimston

Jeff Grimston Ethics sprinkled throughout

Jeff Grimston

Jeff Grimston Index numbers removed fromFP

Jeff Grimston

Jeff Grimston Quality Management has gone

Jeff Grimston

Jeff Grimston scenario planning has gone

Natasha Everard

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Natasha Everard

Natasha Everard I would like to know why variances seem to cause everyone so much trouble?

Jeff Grimston

Jeff Grimston People try to learn variances by rote instead of focusing on what they measure. Once you get the logic of what you want them to tell you they become much more straightforward

Lucie Cave

Lucie Cave Is there an way to remember the logic?

Jeff Grimston

Jeff Grimston Try to picture it as a real business

Natasha Everard

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Rosalyn Carrington

Rosalyn Carrington Variances and written questions

Jeff Grimston

Jeff Grimston With written questions keep it simple

Jeff Grimston

Jeff Grimston If profit has increased say so

Jeff Grimston

Jeff Grimston if unit cost has reduced say so

Jeff Grimston

Jeff Grimston You’ll think of more sophisticated points once you’ve written the easy stuff but there may well be set marks for obvious items

Natasha Everard

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Katie Lowen Bookkeeper

Katie Lowen Bookkeeper Hi, I’m working with variances on budgeting at the moment. I feel like I’ve finally got it and then it just mashes up in my head again.

Natasha Everard

Natasha Everard Overhead variances seem to be another area for confusion.

Jeff Grimston

Jeff Grimston Focus on meanings and the methods become self-explanatory

Jeff Grimston

Jeff Grimston With overheads only three things can change:

Jeff Grimston

Jeff Grimston 1) The amount we spend

Jeff Grimston

Jeff Grimston 2) The amount we produce

Jeff Grimston

Jeff Grimston 3) How many hours we work

Jeff Grimston

Jeff Grimston We have notes to simplify these – say if you’d like a copy

Lucie Cave

Lucie Cave Yes please, I may have some from you already

Natasha Everard
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Katie Lowen Bookkeeper
Katie Lowen Bookkeeper I know I’m talking budget I but I’m sure I’m going to come across this again later but Jeff can you clarify the difference between
Material price and
Material cost please

Jeff Grimston

Jeff Grimston If we buy 500 units at a price of £5.00 but standard price is £4.90 the price variance is 500 x 10p The material cost variance is also affected by the difference between the amount we should have used and the amount we actually used

Jeff Grimston

Jeff Grimston If we should use 600 kgs @ 7.00 but we use 550 kgs for the same amount of output as expected this is a favourable usage variance of 50kgs x 7.00 = £350

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper So the price is the difference in price x actual production

Jeff Grimston

Jeff Grimston Difference in price x actual material used

Jeff Grimston

Jeff Grimston The price variance is not affected by what you actually do with the material bought!

Katie Lowen Bookkeeper
Katie Lowen Bookkeeper Ok, so am I right in saying the material cost variance is the
Difference in amount of product used x std cost

Natasha Everard

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Jeff Grimston

Jeff Grimston When we compare how much material is used against how much we should have used to make this much product this is the usage variance (amount is multiplied by standard cost per kg)

Jeff Grimston

Jeff Grimston If to make 100 units we should need 200kgs @ £4 = £800 and we actually spend £850 to make 100 units this is a total material cost variance of £50

Jeff Grimston

Jeff Grimston It can be caused by differences in price paid and amount used and is the combination of these two

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper Ok, thank you Jeff. I’m going to note down your examples and study them again

Jeff Grimston

Jeff Grimston You’re welcome!

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper I guess the notes you refer to are those you send me the other day

Jeff Grimston

Jeff Grimston The very same!

Natasha Everard
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Natasha Everard

Natasha Everard Does ABC Costing appear in the assessment?

Jeff Grimston

Jeff Grimston It has in the past

Jeff Grimston

Jeff Grimston usually in FP

Natasha Everard

Natasha Everard What are the main points to remember when completing the written sections?

Jeff Grimston

Jeff Grimston Read the scenario carefully and try to picture it as a real business with real products

Jeff Grimston

Jeff Grimston Jot down obvious points in rough and don’t leave out anything that seems too obvious such as as ‘sales have increased’

Jeff Grimston

Jeff Grimston There may well be set marks for such obvious items

Jeff Grimston

Jeff Grimston Put your points in order and write them up concisely but use proper sentences

Jeff Grimston

Jeff Grimston You’ll think of ‘cleverer’ points as you go along

Jeff Grimston

Jeff Grimston Ultimately the answers to questions in these units are actually quite straightforward but it’s the reading of the questions that is the difficult part

Jeff Grimston

Jeff Grimston ‘How many hours should it take to produce this many units?

Jeff Grimston

Jeff Grimston How many hours did it actually take?

Rita Lees

Rita Lees Hi Im currently studying Budgeting (my first level 4 unit) and I have financial performance next – I know elements of budgeting and level 3 costs and revenues are covered in financial performance – can you name any topics in financial performance that will be new to me that you think I might find hard to get to grips with or that commonly others find hard (Ive really struggled with indexing)

Jeff Grimston

Jeff Grimston Multiply by standard hourly rate = efficiency variance

Jeff Grimston

Jeff Grimston At level 4 we go deeper into fixed overhead variances

Jeff Grimston

Jeff Grimston measuring quality is totally new

Jeff Grimston

Jeff Grimston There are new ratios to learn

Jeff Grimston

Jeff Grimston The topics we all find difficult are the ones that seem academic rather than practical

Jeff Grimston

Jeff Grimston In every case if you can see behind the words and figures to what it is you’re trying to achieve it becomes straightforward

Jeff Grimston

Jeff Grimston For indexation think of house prices

Jeff Grimston

Jeff Grimston if you want to compare a house price today with one of 30 years ago you have to adjust to compensate for different wage levels

Jeff Grimston

Jeff Grimston That;s what an index does

Jeff Grimston

Jeff Grimston So if a house is ten times the price but wages are five times as high we can say that houses are really only twice as expensive as 30 years ago

Rita Lees

Rita Lees Good example 🙂

Natasha Everard

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Jeff Grimston

Jeff Grimston That’s the underlying logic

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper All sounds fairly logical when you put a physical item like a house in the scenario

Jeff Grimston

Jeff Grimston Katie has identified the key point

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper My daughter found it a lot easier to learn fractions when we talked about it being a cake. Maybe i need to have a fictional product

Jeff Grimston

Jeff Grimston The more you can picture it as ‘real’ the more your natural common sense will kick in and work it out for you

Jeff Grimston

Jeff Grimston A well written scenario should always involve a believable product or service

Jeff Grimston

Jeff Grimston Mmmm… cake

Jeff Grimston

Jeff Grimston Now everyone is distracted by the thought of cake 🙂

Jeff Grimston

Jeff Grimston The key words with variances are ‘should’ and ‘did’

Natasha Everard

Natasha Everard Does anyone have any further questions?

Jeff Grimston

Jeff Grimston This much product should require this much material but did need …

Jeff Grimston

Jeff Grimston This much material should cost …

Jeff Grimston

Jeff Grimston This amount of production should need this many hours …

Katie Lowen Bookkeeper
Katie Lowen Bookkeeper In a past life I was a professional curtain maker, I can talk in widths, metres, half widths rolls etc until the cows come home. I just need to look at the units being produced as real life items, needing a certain qty of product so I can produce it and hoping I’ve priced the job correctly etc.
What ‘should’ I have quoted and what ‘did’ I charge

Jeff Grimston

Jeff Grimston Is there any cake in your office Natasha?

Natasha Everard

Natasha Everard Nope sorry 🙁

Jeff Grimston

Jeff Grimston This pair of curtains should use this many meters … and this many metres should cost … etc

Jeff Grimston

Jeff Grimston Anyone wanting notes please make sure we have your email address

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper This cake needs this much flour .. And this much flour should cost …

Jeff Grimston

Jeff Grimston exactly difference in amount of flour x std price = usage, difference between four used x std price and actual price paid is price

Jeff Grimston

Jeff Grimston flour not four

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper I think I’ve frightened everyone off with variances 🙁

Jeff Grimston

Jeff Grimston No – they’ve all gone to make tea and eat cake 🙂

Suzanna Rich

Suzanna Rich I can make lemon drizzle cake

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper Cake v variances – no contest

Jeff Grimston

Jeff Grimston Please send cake samples to …

Suzanna Rich

Suzanna Rich On a serious note thanks so much doing this Jeff, definitely should be repeated !

Jeff Grimston

Jeff Grimston Glad it’s been useful

Katie Lowen Bookkeeper

Katie Lowen Bookkeeper Yes thank you Jeff. Speak soon

Natasha Everard

Natasha Everard Okay does anyone have any further question? If not, i would like to thank Jeff for his time this evening and everyone who has participated in the event 🙂

Paula Rutter
Paula Rutter been watching
thank u very much for this

Jeff Grimston

Jeff Grimston You’re welcome

Rose Crockett

Rose Crockett Well done everyone 👍