december 2006 pev paper

wolfe

hey every one. i was doing the paper but i got stuck.
total fixed overhead varaince (under/over absorbed)=fixed overhead volume variance+fixed overhead expenditure varaince. right???
but in this case here ,as you can see
1790 is not equal to 4200 (F)+2000(F)
where am i going wrong.pleeeease help. thanks in advance

Dorset Student

This might help -

Total Fixed O/H Capacity Variance + Total Fixed O/H Efficiency Variance = Total Fixed O/H Volume Variance.

I think you are using the wrong equation.

Tracy

SandyHood

Wolfe

What an excellent question.

There are different ways of absorbing overheads.

1. In intermediate ECR you look at absorption costing based on hours worked.
2. In technician PEV you look at standard absorption costing based on standard hours produced.

Here the actual hours worked were: 27,930
But as we are in a standard costing environment we do not use these hours for the overheads absorbed.
Instead we use 29,400 standard hours based on 117,600 units produced each being equivalent to 0.25 standard hours.

So the over-absorption is £6,200 (which is equal to the expenditure variance plus the volume variance)

At one time the model answer had the wrong answer to 1.1 a vi, this should be £88,200 (in case it is still wrong)

wolfe

thank you Sandy hood

hi. thanks a billion Sandy hood. the puzzle solved atlast. thanks again.