Pev exam paper june 2005

zoeeileen

HI HOPING SOMEONE CAN HELP ME.

ON THE EXAM PAPER ABOVE I GOT STUCK ON THE FIXED OVERHEAD VOLUME VARIANCE TASK 1.1 SECTION B iii AND I AM REALLY HOPE SOMEONE CAN EXPLAIN HOW THEY GOT THE ANSWER.

THANY FOR YOUR HELP ZOE

SandyHood

• Budgeted output for Model F was 10,000 and for Model H was 1,000
• 9,800 Model F and 1,000 Model H stoves were produced
Fixed Overheads absorbed per product

• Model F 5 hours @ £6.00/hr
• Model H 8 hours @ £6.00/hr

So fixed overhead absorbed:
9,800 x 5 hrs x £6 + 1,000 x 8 hrs x £6

And budgeted overhead
10,000 x 5 hrs x £6 + 1,000 x 8 hrs x £6

The difference (absorbed less budgeted) represents the variance (positive being favourable as more was absorbedthan budgeted, negative adverse)