Which method need to be used ？
Hi, here is the pro forma from LSBF :
If you want to see how the pro forma is properly presented on the previous answer please click "EDIT" on my previous answer and it will appear normally.
1) Planning Material price variance: AQ RSP and AQ SP. Planning material usage variance: RSQap SP and SQap SP.
2) operational material price variance : AQ AP and AQ RSP. Operational material usage variance: AQ SP and RSQap SP.
NOTES: AQ= actual quantity, RSP= revised standard price, SP= standard price, SQap= standard quantity for actual production, RSQap= revised standard quantity for actual production.
Now you have the original method and this applies to sales material and labour. As regards sales,instead of standard price it is standard contribution (if marginal costing used) or standard profit (if absorption costing used), as regards material (already done above), as regards labour, instead of standard price it's standard rate.
I think both methods are correct. It is just a matter of consistency. You should use the same quantity for material planning usage. For me, I do prefer the second one. :)