Quick Question Re: O/H Variances

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I haven't got my books to hand therefore can somebody please help?

Am I right in thinking that Volume & Efficiency is equal to Capacity?

Thanks

Nick

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Quick Question Re: O/H Variances

    Efficiency and Capacity are equal to Volume
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Quick Question Re: O/H Variances

    Ok thats great, thanks linda.

    I see why I am re-sitting the PEV exam to finish of AAT. :lol: A bit more revision required

    Many thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Quick Question Re: O/H Variances

    Hi Linda. My 1st time on this forum. can you explain why in Fixed O/head varience, we revert to the standard budgeted units and not the actual units. and why when i get my answer does it look adverse when its fav.???? I always get it the wrong way round because it dosn't look logical to me.
    regards Angela
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Quick Question Re: O/H Variances

    I must say that this is the one topic I struggled to get my head around; it wasn't until I went on a revision course with Sandy Hood that the penny dropped - just enough to pass the exam! With regard to working the variances out I go with what a lot of other forum threads say: -

    ABC (alphabet): Actual - Budgeted = Capacity; that is the actual of what you are absorbing e.g. labour hours worked minus the budgeted labour hours X overhead absorbtion rate. If the 'actual' is then less than the 'budgeted' then it will be adverse coz you have absorbed less overheads than you anticipated - didn't produce as much as you wanted.

    SAE (self addressed envelope): Standard - Actual = Efficiency; that is the standard labour hours for what you produced minus the actual hours it actually took X OAR. If the standard is less than the actual it will be adverse coz again you didn't absorb enough cost - you didn't work as hard during those hours.

    SBV (silly, bloody variances): Standard - Budgeted = Volume; that is the standard labour hours for what you produced minus your budgeted labour hours X OAR. If the standard hours for your production were less than your budgeted than again this is adverse coz you didn't absorb as much as you thought you would.

    Your check will be to add capacity and efficiency together and they should equal volume.

    I hope I have got this right and it makes sense - I did have to get my old notes out to try and remenber. Good luck with your exam.

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