Fixed overhead volume variance
From the information given in Activity 11.4 (a) for Company F, calculate the fixed
overhead volume variance for Company F for November.

Question

Accepted Answer

The fixed overhead volume variance is £18,000 (adverse).
Comment:
For Company F, the standard fixed overhead absorption rate is the standard total
fixed overhead divided by the budgeted standard hours (£180,000/10,000 = £18 per
hour). If the actual standard hours achieved was 11,000, the fixed overhead volume
variance would be:

	£
Actual standard hours × standard absorption rate (11,000 × £18)	198,000
Standard total of fixed overheads (10,000 × £18)	180,000
Adverse fixed overhead volume variance	18,000

Looking back at the information provided for Company F, the total fixed overhead
variance – comparing the standard cost of the fixed overheads (£180,000) with the
actual cost (£170,000) – is £10,000 favourable. Our calculations in Activity 11.4(a)
and 11.4(b) have split this between a £28,000 favourable expenditure variance and a
£18,000 adverse efficiency variance, as shown in Figure 11.8.

Question 11.4[b]: Fixed overhead volume variance From the information given in...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions