Assessment 2 Task 1.2

Hi,

Please can someone help me with answering this question.

Thanks
Sophie


Comments

  • sophie_612sophie_612 LondonRegistered Posts: 102
    @CornishPixie do you know how to work this one out?
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    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)
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    Having a rethink on the VOEV as I now get 210 favourable.
  • sophie_612sophie_612 LondonRegistered Posts: 102

    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?
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    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_612sophie_612 LondonRegistered Posts: 102
    @CornishPixie thank you for this :) i also sent you a message about the other task from yesterday
  • sophie_612sophie_612 LondonRegistered Posts: 102
    @CornishPixie do you know how to workout part b of this question (the highlighted part)

    thanks
    sophie


  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    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_612sophie_612 LondonRegistered Posts: 102

    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?
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    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_612sophie_612 LondonRegistered Posts: 102

    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 :)

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