Page 121 - P1 Integrated Workbook STUDENT 2018

Variance analysis

Capacity variance $
Actual hours × FOAR per hour (4,180 hours × $3) 12,540
Less: Budgeted expenditure 12,000
––––––
Fixed overhead capacity variance $540 F
––––––
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.

Efficiency variance $
Standard hours × FOAR per (1,100 units × 4 hours) × $3 13,200
hour
Actual hours × FOAR per hour (4,180 × $3) 12,540
––––––
Fixed overhead efficiency variance $660 F
––––––

Illustrations and further practice

Now try example 10 from Chapter 8.

117