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Sir there’s one mcq asking to select the correct option to calculate fixed overhead volume variance
Sir just like you told me volume is calculated by flexed and budgeted volume difference, but here the option selected is actual and budgeted volume multiplied by Standard absorption rate.
I didn’t get it, i selected budgeted hours of work and actual hours of work multiplied by the Standard absorption rate per unit and that is incorrect because it’s for capacity variance and i know that too, but because my knowledge about fixed overhead volume variance is flexed and budget so i thought the only option which is reliable could be that, please explain me this sir
It depends on the question. If it is a question in the BPP Revision Kit then tell me which question and then I can check.
Which edition of the Revision Kit are you using, because 24.1 in my edition is nothing to do with variances.
Type the first line of the question – it is probably in all editions.
Sir it’s 2019-2020 edition and i will write the question
Which of the following would correctly calculate the fixed overhead volume variance?
– the difference btw budgeted hours of work and the actual hours of work multiplied by the standard absorption rate per unit
-the difference btw the fixed OH incurred and the fixed OH absorbed
-the diff btw the budgeted fixed OH expenditure and the actual fixed overhead expenditure
-the diff btw actual and budgeted volume multiplied by the standard absorption rate per unit
The volume variance for fixed overheads is the difference between the actual hours at the standard absorption rate, and the budgeted hours at the standard absorption rate.
This is as how I explain it in my lectures (and the variance can then be analysed into the capacity and efficiency variances).
Sir so it’s first option right? A diff btw budgeted hours and actual hours multiplied with standard absorption rate? But in book it’s actual volume and budgeted volume multiplied with standard absorption rate
Sorry, I mistyped – I should have typed actual volume and budgeted volume and the book is correct (as in my lectures).
No problem sir, but actual volume with standard would be flexed i get that, but why we multiplying budgeted with standard, since we just use original budget and flexed budget diff and then multiplying with standard rate
Yes sir all of them, i know generally we multiply the difference of flexed and fixed volume diff with standard rate, but in mcq it specifies budget to be multiplied as well, when we just multiply actual units with standard to get flexed units
I do suggest that you watch my lecture again because I show that the fixed overhead volume variance is calculated exactly as you have quoted from the book.
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