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John Moffat.
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- January 11, 2022 at 7:54 am #645633
Which of the following statements are true?
(I) The fixed overhead volume capacity variance represents part of the over/under absorption of overheads
(ii) A company works fewer hours than budgeted. This will result in an adverse fixed overhead volume capacity variance(i) is true and (ii) is false
Both are true
Both are false
(i) is false and (ii) is trueAnswer is B.
I am not able to get first statement.
Under/over absorption can be shown by Total Fixed Overhead Variance.
Fixed Overhead Volume variance is difference between volume so over/under absorption due to difference in Actual Units and Budgeted Units.
Fixed Overhead Expenditure variance will show difference between price so over/under absorption due to difference in Actual Overhead and Budgeted Overhead.January 11, 2022 at 9:08 am #645638The volume variance is indeed showing the over/under absorption.
This can be analysed into the capacity and efficiency variances (as explained in my lectures).
The first statement is concerning the capacity variance and this is part of the volume variance.
January 11, 2022 at 9:23 am #645639Thank you professor 🙂
January 12, 2022 at 8:19 am #645715You are welcome.
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