help please (L4 Financial performance)
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emma89
Registered Posts: 27 Regular contributor ⭐
Hi, hope somone can help me?!
Q: Budgeted overheads= £90000
Budgeted output = 15000 units and 5000 labour hours
actual output is 14400 units and 4950 actual labour hours
acual overheads £93000
The fixed overhead variance is £2700 adverse
The fixed overhead capacity variance is £900 adverse.
Can anybody please tell me how they worked this out! my books don't make sense.
Thanks
Q: Budgeted overheads= £90000
Budgeted output = 15000 units and 5000 labour hours
actual output is 14400 units and 4950 actual labour hours
acual overheads £93000
The fixed overhead variance is £2700 adverse
The fixed overhead capacity variance is £900 adverse.
Can anybody please tell me how they worked this out! my books don't make sense.
Thanks
0
Comments

Umm..
Nope! I'm confused on that one as well
I get 6600 and 150 adverse0 
thanks anyway!0

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 have0 
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)0 
Same here, Ive got:
Total o'head variance
Actual o'head incurred 93,000
Actual absorption (4800 x £18 BOAR) 86400
6,600 (A)
Expenditure
Budget o'head 90000
Actual o'head 93000
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...0
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