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Fixed Overheads-total variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Fixed Overheads-total variance

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 2, 2015 at 2:24 am #230935
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    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.

    March 2, 2015 at 8:45 am #230952
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

    March 2, 2015 at 1:45 pm #230969
    Molly Sum
    Participant
    • Topics: 39
    • Replies: 53
    • ☆☆

    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 ?

    March 2, 2015 at 3:10 pm #230982
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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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