Overhead volume varaince stuck ..missing parts

topcat

Hello All,

hope your all enjoying the weekend

if someone gets a second could they help me please?

• Budgeted overheads are £1,200,000
• Budgeted output is 30,000 units
• Actual output is 32,500 units
• Actual overheads are £1,198,000

How do i get the volume variance i am out of ideas ? I can do it when there is hours involved but this has thrown me

Thank you

CeeJaySix

Volume variance is can be calculated with either units or hours; if you do it with hours, you do it with the standard hours for the actual ouput rather than the actual hours worked (the actual hours worked come in for efficiency and capacity variances). As the standard hours worked for actual production entails flexing the budget for the units produced, using either will give the same result.

So for your example, it's 32,500 - 30,000 x OAR (1.2m / 30,000 = 40) = 2,500 x 40 = 100,000F (favourable as more units are produced, therefore more cost must be absorbed).

Price variance is 2,000F.

So your double-check is total fixed overhead variance = overheads absorbed by actual production less actual cost = 32,500 x OAR - 1,198,000 = 12,000F.

topcat

brilliant i understand now thank you for taking the time to explain appreciated :001_smile: