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Fixed Overheads-total variance

MSMolly Sum11y ago
The budgeted fixed production overhead for H Ltd for the year 2012 is $48,000. Budgeted direct labour time for the year was 12,000 hours. The standard labour time for one unit of product was 3 hours. During the year, the actual production was 3900 units and the actual number of hours worked was 11500 hours. The actual fixed overhead was $50000. If want to find the total variance the below calculation whether is correct ? my working: OAR = $48000 / 12000 hrs = $4/hr x one unit use 3 hrs = $12 per unit ? actual total cost $50000 compare with standard costs with actual production 3900 units x 3 hrs = 11700 hrs x $4=$46800 total variance $3,200 adverse ? ( can call this as over / under absorption ?) Sir, I would like to know the standard cost per unit whether is $12 or $4 ? I remember in your lecturer variance analysis for calculate total variance use $15 per unit not $3 per hour : actual total cost 8900 units $134,074 standard cost for actual production 8900 units x $15=$133500 $574 adverse please correct me the above. Thank you.
John MoffatJohn MoffatTutor11y ago#1
The standard cost per hour is $4. The standard cost per unit is 3 hours x $4 = $12. Your workings are correct, calculating the standard cost for actual production is the same whether you write it the way you have, or if you write 3,900 units x $12.
MSMolly Sum11y ago#2
hi sir, thank you explanation another question : can you please refer above question again, if find the budgeted unit whether below calculation is correct and please explain the reason ? working : $48,000 / $12per unit = 4000 budgeted unit ?
John MoffatJohn MoffatTutor11y ago#3
Yes, that is correct. You could have got the same result by dividing the budgeted hours of 48,000 by the standard hours per unit (3).
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