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Fixed overhead variance - Standard costing

SSandraS3y ago
Hi Please i need help with the below. Its from the BPP Kit in the multi task section: Mortensen manufactures wooden toys. It uses a standard costing system to control costs. The cutting department cuts the shapes which are sold as toy animals. $ Hardwood 16.00 Direct labour 30 minutes at $9 per hour 4.50 Fixed overhead 30 minutes at $4 per direct labour hour 2.00 22.50 Fixed overhead absorption rates are based upon monthly fixed overheads of $26,000 and a budgeted monthly output of 13,000 sets of animals. In the most recent month 14,000 sets of animals were made. 8,000 direct labour hours were worked and paid at $9.25 per hour. Actual fixed overheads were $23,000 for the month. Calculate the Fixed overhead efficiency Variance and capacity variance. BPP had noted that for efficiency and capacity, the budgeted hours is 14000 sets should have taken 0.5 hours. Im not clear on how the 0.5 hours came about. Please clarify. Thank you
John MoffatJohn MoffatTutor3y ago#1
In the second paragraph it says that the fixed overheads are 30 minutes (which is 0.5 hours), which is the same always as the direct labour (as I explain in my free lectures on variance analysis).
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