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- 10 Marks
Question
The data below relates to Odeneho Plc and they are in respect of the production of its product, Milcho, for the first quarter ended 31 March 2022.
- Budgeted output: 5,000 units
- Standard hours to produce one unit: 2 hours
- Budgeted fixed production overhead: GH¢25,000
- Actual fixed production overhead incurred: GH¢25,840
- Actual hours worked: 10,500
- Actual units produced: 4,980
Required:
Determine the following:
i) Fixed overhead expenditure variance.
(2 marks)
ii) Fixed overhead capacity variance.
(2 marks)
iii) Fixed overhead efficiency variance.
(2 marks)
iv) Fixed overhead volume variance.
(2 marks)
v) Fixed production overhead variance.
(2 marks)
Answer
i) Fixed overhead expenditure variance
Budgeted fixed production overhead−Actual fixed production overhead incurred=GH¢25,000−GH¢25,840=GH¢840
(2 marks)
ii) Fixed overhead capacity variance
(Actual hours worked×Fixed overhead absorption rate)−Budgeted fixed production overhead=(10,500×GH¢2.50)−GH¢25,000=GH¢1,250F
(2 marks)
iii) Fixed overhead efficiency variance
(Standard hours for actual output×Fixed overhead absorption rate)−(Actual hours worked×Fixed overhead absorption rate)=(4,980×2×GH¢2.50)−(10,500×GH¢2.50)=GH¢1,350A
(2 marks)
iv) Fixed overhead volume variance
Capacity variance+Efficiency variance=GH¢1,250F+GH¢1,350A=GH¢100A
(2 marks)
v) Fixed production overhead variance
Fixed overhead expenditure variance+Fixed overhead volume variance=GH¢840A+GH¢100A=GH¢940A
(2 marks)
- Tags: Capacity, Efficiency, Fixed Overhead, Variance Analysis, Volume Variance
- Level: Level 2
- Topic: Standard Costing and Variance Analysis
- Series: AUG 2022
- Uploader: Joseph