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Fixed production overhead capacity variance

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Fixed production overhead capacity variance

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  • July 21, 2016 at 11:50 am #328192
    ddnguyen
    Member
    • Topics: 27
    • Replies: 47
    • ☆☆

    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
    Keymaster
    • Topics: 57
    • Replies: 54699
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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
    Participant
    • Topics: 17
    • Replies: 38
    • ☆☆

    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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