Fixed Overhead Capacity / Efficiency Variances
dpw
New MemberRegistered Posts: 14
Can anybody explain these to me.
Task 3 on the CBA
The Financial Performance book by Kaplan is no help
Task 3 on the CBA
The Financial Performance book by Kaplan is no help
0
Comments

Ok so im sure blobby or avic will correct me if im wrong:
Fixed overheads
Capacity:
This compares the actual hours worked with budgeted hours.
It is calculated by:
Budgeted hours x standard rate
Actual hours x standard rate
For example: A company budgets to use 2000 hours at a standard rate of 7.00 per hour
Actual hours worked were 2200 hours at 7.00 per hour. This would be calculated
2000 x 7 = 14,000
2200 x 7 = 15,400
Variance of £1,400
Efficiency:
All products take different times to produce. This variance calculates how hard they have been working. if we aim to produce 500 units at 3.5hrs each..
Actual hours x standard rate (you may already have this from standard rate)
Standard hours that should have been worked x standard rate
2000 x 7 = 14,000 (Actual)
1750 x 7 = 12,250
Hope this helps a little!0 
more info, I have the answers but not the method
Budgeted overheads are £50,000
Budgeted output 5,000 units and 50,000 labour hours
Actual output is 4,000 units and 43,000 labour hours
Actual overheads are £55,000
Q1. The fixed overhead efficiency variance is ?
Q2. The fixed overhead capacity variance is ?0 
Thanks Katie,
but I can't see how you get the Efficiency variance?0 
The fixed overhead efficiency is 3000 adverse (see below)
The fixed overhead capacity is 7000 adverse (see below)
Efficiency: first off calculate 50,000hrs/5000 units = 10 hrs per unit
The standard rate is 1.00 as £50,000/50000 units is 1.00
Actual hours worked at standard rate
43000 hours x 1.00 = 43,000
Should have been
10 (hrs/unit) x 4000 units x 1.00 = 40,000
Difference of 3,000. Adverse as we have actually used 10.75hrs/ unit (calculated 43000/4000.
Capacity:
budgeted hours at standard rate
50,000 x 1.00 = 50,000
actual hours worked at standard rate
43,000 x 1.00 = 43,000
Hope this helps0 
more info, I have the answers but not the method
Budgeted overheads are £50,000
Budgeted output 5,000 units and 50,000 labour hours
Actual output is 4,000 units and 43,000 labour hours
Actual overheads are £55,000
Q1. The fixed overhead efficiency variance is ?
Q2. The fixed overhead capacity variance is ?
Let's deal with Q2 first?
what is your capacity? ie budgeted hours = 50,000 hrs
How many hours have used? actual hrs = 43,000 hrs
varience = 7000 hrs is this more or less then CAPACITY? Therefore 7000 hrs adverse
Q1 Efficiency variency?
how efficient were you in producing your produc?
work out how many hours do you expect to make a single product? 50 000 hrs / 5000 units = 10 hrs per unit
to produce 4000 units how many hours should you have used? 4000 x 10 = 40 000 hours
hou many hours you have actually taken to produce 4000 units = 43 000 hours
varience is 3 000 hours. were you efficient or inefficient? = therefore 3 000 hrs adverse
to work out monetory value you will need to multiply by standard hourly rate.0 
Thanks!0

its ok, glad it helped.
I have my financial performance exam in 36 hours from now, (second time around) and have spent forever trying to remember these!0 
Sandy Hood did a good paper explaining in layman's terms the various variances. I accessed it when I was revising for management accounting papers late last year. Type her name into the search engine to find her posts.0
