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ACCA F5 Basic Variance Analysis Example 1

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  3. Hi sir, can you explain me why did you used fixed overheads as per unit rather than using as total? And as you mentioned fixed overheads always be same regardless the volume of output unless a step fixed cost come to the stage . So, my question is why this happen? Is it something we must do whenever we are calculating Flexed budget or it’s some cases as like this one?…. I will much appreciate your help.

    • Total fixed overheads will stay fixed, and when we are preparing a flexed budget we keep total fixed overheads unchanged.

      The reason I flex the fixed overheads in the this example (and I do explain this in the lecture) is because we are doing variance analysis and using absorption costing. I do it in under to explain why, with absorption costing, we end up needing a fixed overhead volume variance (which obviously does not exist when it is marginal costing, which again I do explain in the lectures).

  4. Dear Sir,

    When I read the information about actual Labour cost that stated “Labour (45,400 hrs paid, 44,100 hrs worked)”, I was wondering why don’t we just calculate labour cost is 224,515 x 44,100/45,400 = 218,086?

    I really appreciate your help 馃檪
    Thank you very much!

  5. Hi, How did you calculate Actual Budget profit of $37808

    I will much appreciate your help.

    Kind regards
    Meggi

    Ps. Will your lecture prepare me for UK exam?

  6. Hi does Acca specifically require you to use the (a) and (f) for adverse and favourable variances, as opposed to representing an adverse variance in brackets and a favourable without? Thank you 馃檪

    • I do explain in this first lecture of the lectures on variance analysis (and I explained also in the earlier lectures on absorption costing).

      When considering the standard profit per unit, it automatically assumes a standard fixed cost per unit and therefore when flexing the budget we flex also the fixed overheads.
      Obviously the fixed overheads should not change with the production, which is why we have over or under absorption of fixed overheads (as explained in the lectures on absorption costing) and therefore why we have a fixed overheads volume variance.

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