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- March 28, 2022 at 5:14 pm #652151
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. 1,640Respected 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.
March 29, 2022 at 6:04 am #652193Your 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.
March 29, 2022 at 3:22 pm #652232thank you so much for clearing my doubt Sir!
March 29, 2022 at 4:06 pm #652237You are welcome.
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