- 2065 Kartik · 8 marks
Variance analysis, 9,300 vs 10,500 units
Short answer
Fixed overhead total variance Rs 4,137,000 A (expenditure Rs 6,909,000 A, volume Rs 2,772,000 F). Variable overhead total variance Rs 126,000 F (expenditure Rs 3,276,000 F, efficiency Rs 3,150,000 A).
Calculate variance for the following:
| Standard | Actual | |
|---|---|---|
| Production units | 9,300 | 10,500 |
| Direct labour hours | 102,300 | 136,500 |
| Fixed overhead (Rs.) | 21,483,000 | 28,392,000 |
| Variable overhead (Rs.) | 15,345,000 | 17,199,000 |
Standard rates
- Standard hours per unit = 102,300 / 9,300 = 11 h
- Fixed OH rate = 21,483,000 / 102,300 = Rs 210 per hour (budgeted FOH = Rs 21,483,000)
- Variable OH rate = 15,345,000 / 102,300 = Rs 150 per hour
- Actual output 10,500 units, so standard hours for actual output SH = 10,500 × 11 = 115,500 h; actual hours AH = 136,500 h (budgeted hours BH = 102,300)
Fixed overhead variances
Absorbed FOH = 115,500 × 210 = Rs 24,255,000; actual = Rs 28,392,000.
| Variance | Calculation | Rs |
|---|---|---|
| Expenditure | 21,483,000 − 28,392,000 | 6,909,000 A |
| Capacity | (AH − BH) × 210 = (136,500 − 102,300) × 210 | 7,182,000 F |
| Efficiency | (SH − AH) × 210 = (115,500 − 136,500) × 210 | 4,410,000 A |
| Volume | 7,182,000 F + 4,410,000 A (= 24,255,000 − 21,483,000) | 2,772,000 F |
| Total FOH | 24,255,000 − 28,392,000 | 4,137,000 A |
Variable overhead variances
Standard VOH for actual output = 115,500 × 150 = Rs 17,325,000; actual = Rs 17,199,000.
| Variance | Calculation | Rs |
|---|---|---|
| Expenditure | AH × 150 − actual = 20,475,000 − 17,199,000 | 3,276,000 F |
| Efficiency | (SH − AH) × 150 = (115,500 − 136,500) × 150 | 3,150,000 A |
| Total VOH | 17,325,000 − 17,199,000 | 126,000 F |
Answer: Fixed overhead total 4,137,000 A (expenditure 6,909,000 A, volume 2,772,000 F); variable overhead total 126,000 F (expenditure 3,276,000 F, efficiency 3,150,000 A). Labour hours were much above standard (inefficiency), but this was nearly offset by lower variable spending per hour.
✓ Answer checked by Claude Opus 5.5 (high effort)
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