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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Variance
Hi sir, Hope you are in good health. I was confused at a part.
When we were finding effect of extra production of units and we we finding the how much units wereproduces because of efficincyof labour and how much for more labours.
so, we were finding efficiancy and capacity variance. I am talking about lecture part 3
I want to ask about efficiancy variance and capacity variance , why did we used the fixed cost per hour ($3) from cost card insted of labour cost per hour ($5) or Variable cost per hour ($2) while finding the variances
thanks
Because it is the fixed overhead volume variance that we are analysing into the fixed overhead efficiency variance and the fixed overhead capacity variance.
When calculating the labour variances we use the labour cost per hour. When calculating the variable overheads we use the variable overhead cost per hour.