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Variances

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Variances

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • January 2, 2016 at 3:46 pm #293295
    shazzy30
    Member
    • Topics: 17
    • Replies: 45
    • ☆☆

    Hi sir
    How do you work this out?Thanks.

    A manufacturing company operates a standard absorption costing system.
    Last month they budgeted on using 30000 production hours and on a total fixed production overhead cost of $180000.
    The actual hours worked last month were 28000 and the standard hours for the actual production were 31000.
    What was the fixed overhead efficiency variance for last month?

    January 2, 2016 at 5:02 pm #293302
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54664
    • ☆☆☆☆☆

    The standard cost is 180,000/30,000 = $6 per hour.

    They actually worked 28,000 hours and were expected to work 31,000 hours for the actual production, so they were 3,000 hours faster.

    Therefore the efficiency variance = 3,000 x $6 = $18,000 (favourable).

    I do suggest that you watch our free lectures – they are a complete course for Paper F2.

    January 2, 2016 at 6:08 pm #293308
    shazzy30
    Member
    • Topics: 17
    • Replies: 45
    • ☆☆

    Thank you sir

    January 2, 2016 at 10:11 pm #293320
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54664
    • ☆☆☆☆☆

    You are welcome 🙂

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