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Volume variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Volume variance

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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  • June 4, 2016 at 9:07 pm #319456
    aes1212
    Member
    • Topics: 5
    • Replies: 2
    • ☆

    Dear sir

    I am doing a question from my BPP textbook and the answer states that where budgeted hours of work is 5000 hours and actual hours of work is 5500 hours this gives a fixed production o/h capacity variance of 500 favourable. Is this a mistake? I thought this would be adverse and therefore my ultimate answer taking into consideration the $ rate is wrong.

    Thanks

    June 5, 2016 at 8:30 am #319520
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    BPP is correct – it is favourable.

    The easiest way of remembering it is to say that if they get more hours of work then they will be able to produce more units, which is good because it would produce more profit.

    For a full explanation of the rule and the reason for it, you need to watch my free lectures on variances.

    (Our lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)

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