# capacity variance

Registered Posts: 16 New contributor 🐸
can any one help please i have got stuck on how to work out capacity variance
question is
2 million dvd made takes 3 minutes
capacity is 12,500 favourable
actual produce is 1.7 million dvd
fault with dvd lead to a 30,000 cost for specialist
how do i work out the capacity variance please
thanks

• Registered Posts: 73 Regular contributor ⭐
prod cost hrs std cost/hr type
2,000,000 250,000 100,000 2.5 budget
1,700,000 237,500 95,000 2.5 actual

Capacity Variance = Standard fixed overhead rate per hour * (Budgeted hours – Actual hours)

std rate = £2.5 (worked out as budgeted overhead £250k / budgeted hours below)
Budget Hours = 2,000,000 DVD's x 3 minutes each / 60 minutes per hour = 100,000 hours
Actual Hours = unknown from info supplied

The info states that the Capacity Variance is £12.5k favourable so
variance £12,500 / std rate £2.50 = 5000 hours

Summary
Budgeted hours 100,000 at std rate £2.50 per hour = £250,000
Actual hours 95,000 at std rate £2.50 per hour = £237,000
Favourable Varaince £12,500

or as per formula above £2.50 * (100,000 - 95,000) = £12,500