# help please (L4 Financial performance)

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Registered Posts: 27 Regular contributor ⭐
Hi, hope somone can help me?!

Budgeted output = 15000 units and 5000 labour hours
actual output is 14400 units and 4950 actual labour hours

Can anybody please tell me how they worked this out! my books don't make sense.

Thanks

• Registered Posts: 96 Regular contributor ⭐
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Umm..

Nope! I'm confused on that one as well

I get 6600 and 150 adverse
• Registered Posts: 27 Regular contributor ⭐
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thanks anyway!
• Registered Posts: 981 Epic contributor 🐘
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hello
hope the below helps

Actual output 14400
Budget output 15000
difference 600 units
Budgeted overhead £90,000 for 15000 units gives us a BOAR - 90000/15000 =£6/unit

Therefore 600 units @ £6 = £3600 Which is the volume variance which is adverse as we have produced less units than we budgeted

This is then split into Efficiency and Capacity variances

Volume = Efficiency + Capacity

Capacity Variance
Actual hours worked 4950
Budgeted hours 5000
difference 50 hours
OAR = 90000/ 5000 = £18 per hour therefore 50 hours = £900 adverse capacity (adverse because we absorbed less hours than we should have absorbed)

Efficiency Variance
Actual hours worked 4950
Budgeted hours for actual production

15000 units took 5000 hours
so one unit took 0.33 hours therefore 14400 units should have taken 4800 hours
it took 4950 therefore it took 150 hours more at £18 an hour = £2700 adverse cause it took us more hours than it should have
• Registered Posts: 17 New contributor 🐸
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Use labour hours as your OAR, 90000/5000= £18 hour --does that help you? Managed to get the answers-- presuming The first variance is the efficiency variance.?
standard hours= 4800hrs actual hours 4950hrs compare the difference x the OAR(18)
• Registered Posts: 36 Regular contributor ⭐
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Same here, Ive got:

Actual absorption (4800 x £18 BOAR) 86400
6,600 (A)

Expenditure

3000 (A)

Volume variance

Budget Absorption (5000hrs x BOAR) 90000
Actual Absorption (4800hrs x BOAR) 86400
3,600 (A)

Capacity

Budget hrs x BOAR (5000hrs x £18) 90000
Actual hrs x BOAR (4800hrs x £18) 89100
900 (A)

Efficiency

Std hrs for act x Boar (4800 x £18) 86400
Actual hrs x BOAR (4950 x £18) 89100
2700 (A)

Hope that makes sense...