Fixed Overhead Volume Variance
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Debs2809
Registered Posts: 42 Regular contributor ⭐
Hi Folks
According to the AAT magazine Dec2006/jan 2007, Simon Deane has written an article titled Puzzled by variances.
He has stated that the Fixed Volume Variance is calculated by:
How many hrs should have been worked in Production(standard)
How many hrs were budgeted for production (budgeted) the difference is then multipiled by the budgeted overhead absorption rate.
But when I look at Past Papers the budgeted cost for production is compared to the actual cost for production multiplied by the budgeted overhead absorption rate.
Can someone advise please.:confused1:
According to the AAT magazine Dec2006/jan 2007, Simon Deane has written an article titled Puzzled by variances.
He has stated that the Fixed Volume Variance is calculated by:
How many hrs should have been worked in Production(standard)
How many hrs were budgeted for production (budgeted) the difference is then multipiled by the budgeted overhead absorption rate.
But when I look at Past Papers the budgeted cost for production is compared to the actual cost for production multiplied by the budgeted overhead absorption rate.
Can someone advise please.:confused1:
0
Comments

hi Debs2809
when the overheads are absorbed on unit basis the formula for overhead volume variance is :
(ACTUAL OUTPUTBUDGETED OUTPUT) X OAR
but
when the overheads are absorbed on hourly basis the formula for overhead volume variance is:
(standard hrs for ACTUAL OUTPUT budgeted hrs for BUDGETED OUTPUT)X OAR
hope this helps0 
??
I don't understand what are you talking about, if I want to calculate the overhead absorpionn rate, is only:
OVERHEADS divided by MACHINE or LABOUR hour
example £34913/10000 hours = £6.98 ph0
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