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Hello Sir,
Can you please help me with the third part of this question?
M Co is a small manufacturing company. The following information is available:
Budgeted
Labour rate per hour $4
Fixed overhead absorption rate per hour $2.50Actual
Hours worked 3,000 hours
Fixed overheads $9,000Variances
Labour rate 300 favourable
Fixed overhead expenditure 200 favourable
Fixed overhead efficiency 500 adverseRequired:
(a) Using the information available, calculate:
(i) the budgeted fixed overhead expenditure and state if the fixed overhead
capacity variance would be favourable or adverse. (2 marks)
(ii) the labour efficiency variance (2 marks)
(iii) the actual labour rate per hourMy fixed overhead expenditure variance is $9200
And Capacity Variance is $1700 adverse.Thank you in advance
The budgeted fixed overheads are $9200 (not the expenditure variance).
The fixed overhead volume variance is $1700 adverse, and therefore the fixed overhead capacity variance is 1700 – 500 = $1200 adverse
The standard labour rate is $4 per hour. They worked 3,000 hours and had a favourable labour rate variance of $300. Therefore the paid 300/3,000 = $0.10 less than the standard rate, and so actually paid $3.90 per hour.
(But why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and workings.)
Thank you so much sir, The revision kit did had answer but they did not show the working for the above question.
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