Actual data of Company A’s Cost Department for month of June’07:
Number of units produced

180

Overhead costs

$19,400

Hours worked

4,050

Number of working days

20

Company A’s Budget & Standard Costing figures
Standard hours per unit

20

Standard overhead rate per hour

$6.25

Standard fixed overhead rate per hour

$4.00

Budgeted hours per month

4,000

Budgeted working days per month

20

Question:
Compute the:
(a) “Overhead” variance
(b) Fixed production overhead volume variance
(c) Capacity variance
(d) Productivity variance

(a)Overhead variance:
=(SHP x OAR) less Actual cost
=[(180units x 20 hours) x $6.25]$19,400
=(3,600 hours x $6.25)$19,400
=$22,500$19,400
=$3,100(F)


(b) Fixed production overhead volume variance:
=(Budgeted standard hour less SHP) x Fixed OAR
=(4,0003,600) x $4.00
=400 x $4.00
=$1,600(A)


© Capacity variance:
=(Hours worked less Budgeted standard hours) x Fixed OAR
= (4,0504,000) x$4.00
=50 x $4.00
=$200(F)


(e)Fixed cost productivity variance:
=(Hours worked less SHP) x $4.00
=(4,0503,600) x $4.00
=450 x $4.00
=$1,800(A)


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