Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control
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Assessment 2 task 1.3

Can someone please let me how their workings out for variable overhead efficiency?


  • A_KhanA_Khan Registered Posts: 4
    From the budget report you can see variable overheads are based on labour hours. Budgeted at £3000 per 1500 labour hours. So costing £2pLH
    Efficiency variances are based on capacity(units)/actual. EF=C/A
    With the units budgeted of 3000 we can see 1500 labour hours. So 0.5LH per unit
    With the actual there are 3200 units so should expect 1600 labour hours.
    Where infact there is 1920 labour hours. So more hours needed than budget meaning staff being less efficient therefor an adverse variance.
    To work out the variance cost we find the difference 1600-1920= 320 labour hours then times by the variable cost per labour hour worked out at £2pLH = £640 adverse variance
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