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Variable oh/unit = 6
fixed oh/unit=4budgeted production=900
actual production=800fixed costs are accrued at a constant rate.
actual overhead expenditure totalled 8500.overheads are absorbed on the basis of units produced.
“The overhead variances for the month were:”
answer is:
Expenditure var = 100 A
Volume var = 400—- i assumed he is talking about the fixed overhead variances.
so. .volume variance= 800X4-900×4=400A
expenditure variance = actual exp – budgeted
therefore = 8500-3600 … which is obviously wrong.the solution shows it as:
900X4 = 3600
800×6 = 4800
total = 8400
actual=8500
var = 100Ai dont understand his calculations
Because the question does not specify simply fixed overheads, it is asking for the variances for all overheads (fixed plus variable).
Also, the ‘actual overhead expenditure’ has to be the actual for total overheads.The volume variance is only relevant for fixed overheads, and you are happy with this.
The expenditure variance compares actual expenditure (8500) with standard cost for actual production, which for variable overheads is 800 x 6 = 4800, and for fixed overheads is the budgeted expenditure of 3600 (you are happy with this bit).
So total standard cost is 4800 + 3600 = 8400, which is 100 different from actual.
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