Assessment 2 Task 1.2

sophie_612

Hi,

Please can someone help me with answering this question.

Thanks
Sophie

sophie_612

@CornishPixie do you know how to work this one out?

CornishPixie

Hi there.

So first, you need to work out your standard costs.

36/3 = £12 per standard kg
1.5 x 300 = 450 standard hours
22.5/1.5 = £15 per standard hour

Then just use the calculations to get the variance.

So for materials usage: (300 x 3kg x 12) - (960 x 12) = -720 (adverse)
labour rate variance: (1.5 x 300 x £15 ) - 7140 = -390 (adverse)
Variable overhead efficiency variance: (10.50 x 450) - (10.5 x 420) = 315 (favourable)

CornishPixie

Having a rethink on the VOEV as I now get 210 favourable.

sophie_612

CornishPixie said:

Having a rethink on the VOEV as I now get 210 favourable.

@CornishPixie thanks for that, now that you get 210 do i need to do a different calculation?

CornishPixie

Yes, so you need to take the 10.5 standard hours and divide by the 1.5 standard hours to give you 7.

450 x 7 = 3150
420 x 7 = 2940
3150 - 2940 = 210 favourable

sophie_612

@CornishPixie thank you for this i also sent you a message about the other task from yesterday

sophie_612

@CornishPixie do you know how to workout part b of this question (the highlighted part)

thanks
sophie

CornishPixie

Right, so the overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods.

Having only had a quick look at this, I would try:
16,000 / 12800 = 1.25
1.25 x 14,000 = 17500
17500 - 18200 = -700 (adverse)

Let me know if I'm right or wrong though - if wrong I will have another look tonight.

sophie_612

CornishPixie said:

Right, so the overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods.

Having only had a quick look at this, I would try:
16,000 / 12800 = 1.25
1.25 x 14,000 = 17500
17500 - 18200 = -700 (adverse)

Let me know if I'm right or wrong though - if wrong I will have another look tonight.

@CornishPixie i checked the answers and they show it as 1500 favorable, do you know how they would have got that?

CornishPixie

Ooops, I got that slightly wrong.

It is the actual units x absorption rate - budgeted units x absorption rate.

We know that the absorption rate is 16,000 / 12,800 = £1.25

So that would give us 14,000 x 1.25 (17500) - 12,800 x 1.25 (16,000) = 1500 favourable

sophie_612

CornishPixie said:

Ooops, I got that slightly wrong.

It is the actual units x absorption rate - budgeted units x absorption rate.

We know that the absorption rate is 16,000 / 12,800 = £1.25

So that would give us 14,000 x 1.25 (17500) - 12,800 x 1.25 (16,000) = 1500 favourable</blockquote

thank you for your help