Fixed production overhead capacity variance

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July 21, 2016 at 11:50 am #328192
ddnguyen
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Hi Tutors,
could you help me with this question?
A manufacturing company operates a standard absorption costing system. Last month 25,000 production hours were budgted fixed production overhead cost was 125,000. Last month the actual hours worked were 24,000 and the standard hours for actual production were 27,000.
What was the fixed production overhead capacity variance for last month?
A. $5.000 Adverse
B. $5.000 Favourable
C. $10.000 Adverse
D. $10.000 Favourable
Thanks a lot
July 21, 2016 at 2:21 pm #328225
John Moffat
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You must ask in the Ask the Tutor Forum if you wish for me to answer. This forum is for students to help each other 🙂
November 25, 2016 at 11:18 am #351387
Jegan
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ddnguyen
The fixed production overhead capacity variance =
AHxSR = 24000 x (125000/25000) = 120000
BHxSR = 125000 (given in question)
Therefore the capacity variance = (AHxSR) – (BHxSR) = 120000-125000 = $5000 Adverse.
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