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Variance – find actual fixed overhead expenditure & actual production

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Variance – find actual fixed overhead expenditure & actual production

  • This topic has 8 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 9 posts - 1 through 9 (of 9 total)
  • Author
    Posts
  • February 12, 2015 at 3:21 pm #228135
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    A company operates a standard marginal costing system. Last month actual fixed overhead expenditure was 2% below budget and the fixed overhead expenditure variance was $1250.

    What was the actual fixed overhead expenditure for the last month?

    A.61250, B.62475 C.62500 D.63750

    can please advise whether I can use the answer to find the correct answer ?

    See my working :
    I use the answer C = 62500 – 2% = 61250 ( correct answer is A) to get actual overhead ? but answer is correct.

    another question :

    The standard direct material cost for a product is $50 / unit (12.5kg at $4/kg).Last month the actual amount paid for 45600kg of material purchased and used was $173,280 and the direct material usage variance was $15200 adverse.

    What was the actual production last month?

    A.3344 units B.3520 units C.3952 units D.4160 units

    my working :

    I take answer A . 3344 units x 12.5/kg = 41800 kg
    less actual used = 45600 kg
    variance usage 3800 kg x $4/kg = $15,200 adverse

    please advise can I take the answer to test one by one until I get $15,200 ?
    thank you.

    February 12, 2015 at 4:19 pm #228147
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I don’t understand your workings for the first question. If the variance is 2% of budget, the budget must be 1250 / 2%.
    Actual is below budget by 1250 and so there you are.

    February 12, 2015 at 4:21 pm #228148
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    For your second question – yes you can try each answer one by one (the exam is marked by computer and it does not know how you got the answer). However the problem is that it does take more time, and there is a lot of time pressure in the exam.

    February 14, 2015 at 3:30 pm #228376
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    Thank you advice

    Please correct me the below calculation whether is the correct way to get the actual production units :

    45600 / $4 per kg = 11400

    adverse 15200 – 11400 = 3800

    45600 – 3800 = 41800 / 12.5 kg = 3344 units ?

    thank you.

    February 14, 2015 at 6:48 pm #228394
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The standard cost of the actual material used is 45600 x $4 = 182,400.

    The usage variance is 15200 adverse, so the standard cost for the actual production must be 182,400 – 15,200 = 167,200.

    So the production must be 167200 / 50 = 3344 units

    February 15, 2015 at 5:59 am #228411
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    thank you very much for the teaching for my learning journey.

    February 15, 2015 at 9:07 am #228423
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

    February 19, 2015 at 5:00 pm #229226
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    1st question :

    if question give is 2% above , whether should be 1250 / 2% = 62500+1250=63,750?
    because below is less ( 1250/2%=62500-1250=61250 answer is A)
    kindly explain why below is less than why above is add ?

    2nd question :

    the usage variance is 15200 adverse but if the usage variance is favourable whether is added ?

    thank you

    February 20, 2015 at 7:53 am #229279
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The question says the actual is below budget. So actual = budget less variance.

    If the usage variance is adverse then it means the actual expense was more than the standard cost (so the standard cost is lower than the actual)

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