standard costing fixed overhead variances

lakshay (ipcc) (581 Points)

21 February 2011

BUDGET ACTUAL

fixed overhead for june rs 10000 rs 12000

production in june(units) 2000 2100

std time per unit (hours) 10

actual hours worked 22000

compute

fixed overhead cost variance

expenditure variance

volume variance

pls help me..

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CA. Raminder Dhiman (Educational Consultancy) (189 Points)
Replied 16 March 2011

Solution:

Fixed Overhead Cost Variance= Absorbed Overheads – Actual Overheads

Actual Output X Standard Fixed Overhead rate per unit – Actual Output X Actual Fixed Overhead rate per unit

Standard Fixed Overhead rate per unit = Budgeted Overheads / Budgeted Output

10000/2000= Rs. 5 per unit

Actual Fixed Overhead rate per unit = Actual Overheads/ Actual Output

12000/2100= 5.714

Applying above formula:

Fixed Overhead Cost Variance = 2100 X 5 – 2100 X 5.714 = 1499.4 (Adverse)

Fixed Overhead Expenditure Variance = Budgeted Overhead – Actual Overhead

Budgeted Output X Standard Fixed Overhead rate per unit – Actual Output X Actual Fixed Overhead rate per unit.

Applying above formula:

Fixed Overhead Exp Variance = 2000 X 5 – 2100 X 5.714 = 1999.4 (Adverse)

Fixed Overhead Volume Variance = Absorbed Overheads – Budgeted Overheads

Actual Output X Standard Fixed Overhead rate per unit – Budgeted Output X Standard Fixed Overhead rate per unit

Applying above formula:

Fixed Overhead Volume Variance = 2100 X 5 – 2000 X 5 = 500 (Favourable)

Check: FOHCV= FOHVV+FOHEXPV= 2000 (Adverse)+500 (Favourable)= 1500 (Adverse)

Note:

Fixed Overhead Cost Variance & Fixed Overhead Expenditure Variance is in decimals due to approximation.
This problem have been solved using Output approach, however other approach is to solve through Hour approach. This is the reason that actual hours worked 22000 and Std time per unit 10 hrs not used while solving question.