Standard Costing Question & Answer For Overhead Variance,Fixed Production Overhead Volume Variance, Capacity Variance And Productivity Variance


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

Number of units produced


Overhead costs


Hours worked


Number of working days



   Company A’s Budget & Standard Costing figures

Standard hours per unit


Standard overhead rate per hour


Standard fixed overhead rate per hour


Budgeted hours per month


Budgeted working days per month





Compute the:


(a)    “Overhead” variance

(b)   Fixed production overhead volume variance

(c)    Capacity variance

(d)   Productivity variance




Answer to above Question:



(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




(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



© Capacity variance:

=(Hours worked less Budgeted standard hours) x Fixed OAR

= (4,050-4,000) x$4.00

=50 x $4.00



(e)Fixed cost productivity variance:

=(Hours worked less SHP) x $4.00

=(4,050-3,600) x $4.00

=450 x $4.00




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