Mac June 07

neuroticprincess

Can anyone help me with 2.1biv. I have been taught to calculate the fixed overhead volume variance by taking the standard hours for actual production from the standard hours for standard production. However I then end up with 400f and an oar of £0.20 which gives £80. Can someone tell me where I'm going wrong please?

Cyfarthfa

Hi,

I've jsut checked the qu. and this one is fixed overheads are absorbed by units and not hours. With this one, it's the same formula as you would do for efficiency.

So the absorption rate is Fixed O'hs £100,000 / no. of units 500,000 = 0.2

The formula is then: (Budgeted output - Actual output) x OAR.

As absorbed by units its: (500,000 - 540,000) x 0.2 = 8,000 Favourable

neuroticprincess

Thank you for your reply. How did you know it is units and not hours or I have just not read the question properly?!

Thank you

Ampsie

Hi,

I did this one yesterday, it tels you at the start of the question that the overheads are fixed and absorbed using units!

Ampsie