PEV Kaplan Mock
mikshake
Registered Posts: 70 💫 🐯 💫
Hi,
Just doing the mock but I have a possibly silly question. I'm a bit confused about the fixed overhead capacity variance. I always thought if the actual was higher, then it would be a favourable variance. (And I'm sure I've seen it shown as favourable in other questions) But it was adverse, why would this be?
My answer:
Actual 50400
Budgeted 47040
3360
Thanks!
mikshake~
Just doing the mock but I have a possibly silly question. I'm a bit confused about the fixed overhead capacity variance. I always thought if the actual was higher, then it would be a favourable variance. (And I'm sure I've seen it shown as favourable in other questions) But it was adverse, why would this be?
My answer:
Actual 50400
Budgeted 47040
3360
Thanks!
mikshake~
0
Comments

Hi, I haven't seen this question but you could be confusing the standard hours for actual output (which is a measurement of the production volume) and the actual labour hours worked (which is a measurement of production capacity).
If the first one is above the budgeted hours you have a favourable volume variance and if the second one is above budgeted hours then you have a favourable capacity variance.
If you had the situation where actual labour hours were below budget and standard hours for actual output were above budget then you would have an adverse capacity variance and a favourable volume variance (and very favourable efficiency variance).
Hope this helps!0 
Milkshake  your answer is the answer to the overhead efficiency variance  so is adverse as actual hours taken is higher than standard hours.
Overhead capacity variance is favourable. Wont give the answer in case you're still trying it!0 
I checked the answers and my answer of £3360 is for the capacity variance. Think it's too hard to take any revision in on a Sunday lol.
mikshake~0
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