Page 120 - P1 Integrated Workbook STUDENT 2018

Chapter 7

Example 6

Jayco’s budget is for 1,000 boxes of earplugs but it ends up making 1,100
boxes.

The budgeted fixed overhead per unit is $12, which is made up of standard
hours per unit of 4 and fixed overhead incurred at the rate of $3 per hour

The actual fixed overhead expenditure was $11,600 and 4,180 hours were
worked on production.

Calculate the following fixed overhead variances for Jayco using:

 expenditure

 volume

 efficiency

 capacity.

Solution

Expenditure variance

= budgeted fixed cost – actual fixed cost.

= ($12 × 1,000) – $11,600 = $400 Favourable

Volume variance
Actual production volume 1,100
Budgeted production volume 1,000
–––––––
Fixed overhead volume variance (units) 100
–––––––
Standard fixed overheads per unit $12
–––––––
Fixed overhead volume variance $1,200 F
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