- 2065 Chaitra · 8 marks
Standard costing variances, 3000 vs 2500 units
Short answer
Fixed overhead total variance Rs 833 A (expenditure Rs 1,500 F, efficiency Rs 1,296 A, calendar Rs 1,037 A). Variable overhead total variance Rs 2,667 A (expenditure Rs 1,741 A, efficiency Rs 926 A).
The following information has been obtained from the records of a manufacturing company using standard costing system.
| Standard | Actual | |
|---|---|---|
| Production (Unit) | 3000 | 2500 |
| Working days | 27 | 25 |
| Fixed overhead variance | 14000 | 12500 |
| Variable overhead variance | 10000 | 11000 |
| Find all the variances (including all its components). |
Interpretation and assumptions
The "variance" rows are the overhead costs: standard (budgeted) fixed overhead Rs 14,000 for 3,000 units in 27 working days; actual Rs 12,500. Standard variable overhead Rs 10,000; actual Rs 11,000. Working days serve as the time base (hours are not given).
Standard rates
- Fixed OH rate per unit = 14,000 / 3,000 = Rs 4.667; per day = 14,000 / 27 = Rs 518.52
- Variable OH rate per unit = 10,000 / 3,000 = Rs 3.333; per day = 10,000 / 27 = Rs 370.37
- Standard output in actual 25 days = 3,000/27 × 25 = 2,777.8 units
Fixed overhead variances
Absorbed = 2,500 × 4.667 = 11,666.7; actual = 12,500.
| Variance | Calculation | Rs |
|---|---|---|
| Expenditure | Budgeted 14,000 − actual 12,500 | 1,500 F |
| Efficiency | (Actual output − std output in actual days) × 4.667 = (2,500 − 2,777.8) × 4.667 | 1,296.3 A |
| Calendar (capacity) | (Actual days − budgeted days) × 518.52 = (25 − 27) × 518.52 | 1,037.0 A |
| Volume variance | Efficiency + calendar | 2,333.3 A |
| Total FOH variance | 11,666.7 − 12,500 | 833.3 A |
Variable overhead variances
Std VOH for actual output = 2,500 × 3.333 = 8,333.3; actual = 11,000.
| Variance | Calculation | Rs |
|---|---|---|
| Expenditure | Std for actual days (25 × 370.37 = 9,259.3) − actual 11,000 | 1,740.7 A |
| Efficiency | Std for actual output 8,333.3 − 9,259.3 | 925.9 A |
| Total VOH variance | 8,333.3 − 11,000 | 2,666.7 A |
Answer: Fixed overhead total = 833 A (expenditure 1,500 F, volume 2,333 A made of efficiency 1,296 A and calendar 1,037 A); variable overhead total = 2,667 A (expenditure 1,741 A, efficiency 926 A).
✓ Answer checked by Claude Opus 5.5 (high effort)
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