Fixed overhead variances
kevc90
Registered Posts: 8
Hello,
Wonder if someone could help me with the expenditure variance for the below:
Budgeted production is 10,000 units @ 6 hours per unit with a labour cost of 5 pounds per hour
Actual production is 11,500 units using 70,150 hours at a total cost of 343,735
Overheads are apportioned on the basis of budgeted total labour hours. Total fixed overheads are budgeted at 600,000 with actuals of 630,000
Any general tips on understand these would be appreciated!!
Wonder if someone could help me with the expenditure variance for the below:
Budgeted production is 10,000 units @ 6 hours per unit with a labour cost of 5 pounds per hour
Actual production is 11,500 units using 70,150 hours at a total cost of 343,735
Overheads are apportioned on the basis of budgeted total labour hours. Total fixed overheads are budgeted at 600,000 with actuals of 630,000
Any general tips on understand these would be appreciated!!
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https://s3-eu-west-1.amazonaws.com/bppassets/public/assets/pdf/learning-media/Update-to-the-MDCL-Assessment.pdf
Just incase you haven't gotten the answer to your Q.
Fixed Overhead Expenditure : Actual - Budget
£630,000 - £600,000 = £30,000
Fixed Overhead Volume : Budget - SH * SR (Standard Hour * Standard Rate)
£600,000 - 300,000 (10,000*6*5) = 300,000
Fixed Overhead Capacity : Budget - AH * SR (Actual Hour * Standard Rate)
£600,000 - 350750 (70150*5) = 249250
Fixed Overhead Efficiency: AH * SR - SH * SR (Standard Hour * Standard Rate)
350750 - 300,000 = 50,750
Total Fixed Overhead : Actual - SH * SR (Standard Hour * Standard Rate)
£630,000 - 300,000 = 330,000
B= £600,000
S=£10 x (11500 x 6 h) = £690,000
A=£630,000
AA=£10 x 70,150= £701,500
Fixed overhead expenditure: B-A = 600,000 - 630,000= -30,000 (Adverse)
Volume variance: S-B=690,000-600,000= 90,000 (Favourable)
Capacity variance: AA-B = 701,500 -600,000 = 101,500 (Favourable)
Efficiency variance: S-AA = 690,000 - 701,500 = -11,500 (Adverse)