PEV:- Fixed overhead variances

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:27AM in AAT student discussion
Hi Everyone

I know this much:
Expenditure & Volume variances are equal to the Total fixed overhead variance.
&
The Efficiency & Capacity variances are equal to the Volume Variance.

Somehow... I always end up taking the wrong figures and just confuse myself.
My question is :- is there a way of doing this step by step so you can take the theory into any circumstance or is it just a case of learning each formula and hope you remember??

Like with a balance sheet, you have a layout which helps you do one thing at a time... can that work here?? :cry:

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV:- Fixed overhead variances

    Stacey
    If production is lower than budget
      There will always be an adverse f o volume variance
    There are more than one way to work out the value, one way is overhead absorbed per unit x difference between budgeted output and actual output.

    If hours worked are lower than budgeted total hours
      There will always be an adverse f o capacity variance
    one way to work out the value is overhead absorbed per hour x difference between budgeted hours and actual hours.

    If the standard hours (units produced x standard hours per unit) are lower than the actual hours
      There will always be a favourable f o efficiency variance

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV:- Fixed overhead variances

    Hi Sandy

    When i do the Volume variance i end up with the capacity answer... even when i read over how to do it in the osborne book i just dont understand... I feel like i'm missing a key bit of information as it's just not making sense to me.

    How do i know which figures to take... the budgeted figures or the new bugeted figures based on the actual production.... I'm going round in circles and just not getting anywhere....

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