Financial Performance - Variances help

missm4ry4m

Hi,

Is the overhead volume variance the one that turns into an adverse one and vice versa?
I thought the capacity one did, I'm just confused over this question in the Osbourne workbook.

Can anyone clarify?

Thanks

Jo Clark

Can you post the question in full?

missm4ry4m

*Fixed overheads are budgeted at £430,000
*Output is budgeted at 344,000 units
*Fixed overheads are absorbed on a per unit basis
*Actual fixed overheads amount to £419,500
*Actual output is 350,000 units

Fixed overhead expenditure which I've got as 10,500 F
Fixed overhead volume which is 7,500 but I'm not sure whether it's F or A

Thanks

SandyHood

£7,500 favourable

Certain facts are always true
This one: If actual production is more than budgeted production the volume variance is favourable (every time)

The overhead absorption rate is £1.25 per unit, and 350,000 units absorb £437,500.
If the absorbed overhead is more than the budgeted overhead the volume variance is favourable

missm4ry4m

Thank you Sandy!!