Help..... Financial performance Q

Sammmy88

Hi,

On the aat paper for financial performance (the once you can print out).
On task 4, there is an operating statement and I can't for the life of me work it out :-(

Could someone help me and point me in the right direction?

Thanks

vickie88

Just had a look am not sure which one your looking at can you send a link to it and ill have a look x

Sammmy88

The Question is:

Budgeted Overheads are: £52,000
Budgeted Output is 2,600 units & 10,400 Labour Hours
Acutal Output is 2,800 units & 10,900 Labour Hours
Actual Overheads are: £46,500

Whats the Effeciency Variance?
Whats the Capacity Variance?

I have worked out... (I think) that the volume variance is £4,000

But can't work out the others...

Chimpette22

Hi Sammy,

I would say the efficiency variance is £1500 Favourable and Capacity is £2500 Favourable.

Of course I'm still learning so I could very well be wrong

Efficiency worked on 10400 hrs/2600 units x 2800 Actual units = 11200hrs, take that from the actual hrs 10900 and leaves 300 difference x by Standard (52000/10400) = £1500.

Does that make sense.. haha

Chimpette22

With the Capacity I worked it out on:-

Standard Rate (5.00) x Actual hours (10900) = 54500 which is more than we actually paid, minus the budgeted O/H cost (52000) = 2500

aaron0121

Hi Sammy,

Efficiency variance is OAR(SHAT- AHT)

OAR = 52000/10400=5

SHAT= 10400/2600*2800=11200 You need to flex the standard hours with actual output

AHT = 10900

Then 5(11200-10900)= 1500 Favourable

Capacity Variance = OAR( AHT-SHT)

OAR = 5

AHT = 10900

SHT = 10400

Into the formula 5(10900-10400) =2500 Favourable

Yes you're right volume variance is 4000 :thumbup1:

Does this help?

Sammmy88

Thanks to you both!! It makes perfect sence!!

Thank you! Just panicking that's all !!