---
title: "Standard costing variances, 3000 vs 2500 units"
subject: "Engineering Economics"
chapter: 1
key: "semester_6/engineering_economics:variances-3000-units-27-days"
source: https://www.bctengineer.com/q/semester_6/engineering_economics/variances-3000-units-27-days
site: BCT Engineering
---

# Standard costing variances, 3000 vs 2500 units

Engineering Economics · Chapter 1: Introduction

- Asked in: 2065 Chaitra, 8 marks
- Video: [28. Material Cost , Material Price & Material Usage Variance - Problem With Solution](https://www.youtube.com/watch?v=Ij4BtLX4itA) — Devika's Commerce & Management Academy
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_6/engineering_economics/variances-3000-units-27-days
- Whole chapter: https://www.bctengineer.com/md/semester_6/engineering_economics/chapter-1

## Question

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).

## 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).

## Answer

#### 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).**

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. In the answer, how is the standard fixed overhead rate per unit found?
   A. Budgeted fixed overhead / budgeted units = 14,000 / 3,000
   B. Actual fixed overhead / actual units = 12,500 / 2,500
   C. Budgeted fixed overhead / actual units = 14,000 / 2,500
   D. Actual fixed overhead / budgeted units = 12,500 / 3,000
   Answer: A. The standard rate uses budgeted (standard) cost over budgeted output, giving Rs 4.667 per unit. (Key point: Standard fixed OH rate)

2. What is the fixed overhead expenditure variance and its sign?
   A. Rs 1,500 Adverse
   B. Rs 1,500 Favourable (budgeted 14,000 minus actual 12,500)
   C. Rs 833.3 Adverse
   D. Rs 2,333 Adverse
   Answer: B. Actual fixed overhead was lower than budget, so expenditure variance is favourable by Rs 1,500. (Key point: Fixed OH expenditure variance)

3. How is the calendar (capacity) variance computed, and why is it adverse?
   A. (Actual output - standard output) x Rs 4.667; output was lower
   B. (Budgeted 14,000 - actual 12,500); cost was lower
   C. (Actual days - budgeted days) x Rs 518.52 per day; only 25 days were worked instead of 27
   D. (Actual days - budgeted days) x Rs 370.37 per day; days were fewer
   Answer: C. Fewer working days than budgeted means less fixed overhead absorbed: -2 x 518.52 = Rs 1,037 A. (Key point: Calendar variance)

4. In the answer, how are the fixed overhead volume variance and total variance related?
   A. Volume = expenditure + efficiency = 206 F; total = 14,000 - 12,500
   B. Volume = calendar - efficiency = 259 F; total = 833 F
   C. Volume = expenditure + calendar = 463 F; total = 2,333 A
   D. Volume = efficiency + calendar = 2,333 A; total = absorbed 11,667 - actual 12,500 = 833 A
   Answer: D. Volume splits into efficiency (1,296 A) and calendar (1,037 A); total = expenditure 1,500 F + volume 2,333 A = 833 A. (Key point: Volume variance and total)

## Related in Engineering Economics

- [Standard costing variances for a building company](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Avariances-cement-mason-standard-costing) — Engineering Economics, chapter 1
- [Fixed overhead cost variance from standard card](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Afixed-overhead-variance-standard-card) — Engineering Economics, chapter 1