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overheads+variance

SSohan4y ago
The standard fixed production OAR in a factory is $20/machine hour. 1,760 machine hours were worked during the period in which the fixed production overhead variances included: Capacity $3,600 Fav Volume $2,400 Adv What were the budgeted machine hours? a. 1,580 b. 1,880 c. 1,940 d. 1,640 Respected Sir, when I use the capacity variance and work my way backwards the ans I get is 1580: capacity variance =3600F so we've got more hours than expected. with std. OAR of $20 per hr. we've got 3600/20=180 more hours so our budgeted hrs. =actual hours of 1760-180=1580 hrs. then I tried using the volume variance, and work my way backwards the ans I get is 1880: volume variance =2400A so we've produced less hours than expected. with std. OAR of $20 per hr. we've got 2400/20=120 less hours so our budgeted hrs. =actual hours of 1760+120=1880 hrs. To say the least, I'm perplexed. Where have I gone wrong? Please sort me out Sir.
John MoffatJohn MoffatTutor4y ago#1
Your calculation with the capacity variance is correct. However the volume variance is the total of the capacity and the efficiency variance and for this we need to know how many units are produced. We do not know this and therefore the volume variance is the question is not relevant for getting the budgeted machine hours.
SSohan4y ago#2
thank you so much for clearing my doubt Sir!
John MoffatJohn MoffatTutor4y ago#3
You are welcome.
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