Pev june 05 task 1.3b
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shama72
Registered Posts: 8 New contributor 🐸
Hi
Can anyone help me please with task 1.3b. I forgot about ABC
I do not know how to answer this question. Can anyone explain to me in simple english pls.
Thanks
Can anyone help me please with task 1.3b. I forgot about ABC
I do not know how to answer this question. Can anyone explain to me in simple english pls.
Thanks
0
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Hia
Im just doing that paper now i dont know where to start either its confussing with the two models isnt it. How did you deal with the overheads? Do you have to split the fixed costs over the two models?0 
Treat the fixed overheads as a single amount in all the variances.
Budgeted fixed overhead cost
Model F production x hrs per unit x OAR per hour
Model F 10,000 units 5 hours £6.00 per hour = £300,000
Model H n1,000 units 8 hours £6.00 per hour =n£48,000
Total Budgeted fixed overhead Model Fodel F £348,000Sandy
sandy@sandyhood.com
www.sandyhood.com0 
Absorbed (or standard cost for actual production of) fixed overhead cost
Model F production x hrs per unit x OAR per hour
Model F 9,800 units 5 hours £6.00 per hour = £294,000
Model H 1,000 units 8 hours £6.00 per hour =nn£48,000
Total Absorbed fixed overhead Model Fodenn £342,000Sandy
sandy@sandyhood.com
www.sandyhood.com0 
Standard fixed overhead cost based on hours actually worked
Model F hours worked x OAR per hour
Total overhead 58,600 hours £6.00 per hour = £351,600
And Actual overhead incurred = £360,000Sandy
sandy@sandyhood.com
www.sandyhood.com0 
So now the variances come out reasonably well
Expenditure
Budget m£348,000
Actual ...£360,000
Variance ..£12,000 (adverse)
Volume
Absorbed mm£342,000
Budget mmm.£348,000
Variance mmmm£6,000 (adverse)Sandy
sandy@sandyhood.com
www.sandyhood.com0 
And the volume variance then splits into Capacity and Efficiency
Capacity
Standard fixed overhead cost based on hours actually worked mm£351,600
Budget mm.....................................................................m.£348,000
Variance mmm.....................................................................m£3,600 (favourable)
Efficiency
Absorbedmmmmmmmmmm....mmmmmmmmmmmmmmmmmmmm mm£342,000
Standard fixed overhead cost based on hours actually worked mm£351,600
Variance mmm.....................................................................m£9,600 (adverse)Sandy
sandy@sandyhood.com
www.sandyhood.com0
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