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Actual data of Company A’s Cost Department for month of June’07:
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Number of units produced
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180
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Overhead costs
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$19,400
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Hours worked
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4,050
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Number of working days
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20
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Company A’s Budget & Standard Costing figures
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Standard hours per unit
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20
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Standard overhead rate per hour
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$6.25
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Standard fixed overhead rate per hour
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$4.00
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Budgeted hours per month
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4,000
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Budgeted working days per month
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20
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Question:
Compute the:
(a) “Overhead” variance
(b) Fixed production overhead volume variance
(c) Capacity variance
(d) Productivity variance
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(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)
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(b) Fixed production overhead volume variance:
=(Budgeted standard hour less SHP) x Fixed OAR
=(4,000-3,600) x $4.00
=400 x $4.00
=$1,600(A)
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© Capacity variance:
=(Hours worked less Budgeted standard hours) x Fixed OAR
= (4,050-4,000) x$4.00
=50 x $4.00
=$200(F)
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(e)Fixed cost productivity variance:
=(Hours worked less SHP) x $4.00
=(4,050-3,600) x $4.00
=450 x $4.00
=$1,800(A)
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