# 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

294Fixed 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!

14Budgeted 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 ?

14but I can't see how you get the Efficiency variance?

294The 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 helps

585Let'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.

14294I have my financial performance exam in 36 hours from now, (second time around) and have spent forever trying to remember these!

632,903Just for future reference Jonno, Sandy is a he :001_smile: