capacity variance
lindas1967
Just JoinedRegistered Posts: 16
can any one help please i have got stuck on how to work out capacity variance
question is
2 million dvd made takes 3 minutes
budget overhead is 250,000
capacity is 12,500 favourable
efficiency variance is 50,000 adverse
volume variance is 37,500 adverse
expenditure variance is 25,000 adverse
total fixed overhead is 62,500 adverse
actual produce is 1.7 million dvd
fault with dvd lead to a 30,000 cost for specialist
how do i work out the capacity variance please
thanks
question is
2 million dvd made takes 3 minutes
budget overhead is 250,000
capacity is 12,500 favourable
efficiency variance is 50,000 adverse
volume variance is 37,500 adverse
expenditure variance is 25,000 adverse
total fixed overhead is 62,500 adverse
actual produce is 1.7 million dvd
fault with dvd lead to a 30,000 cost for specialist
how do i work out the capacity variance please
thanks
0
Comments

prod cost hrs std cost/hr type
2,000,000 250,000 100,000 2.5 budget
1,700,000 237,500 95,000 2.5 actual
Capacity Variance = Standard fixed overhead rate per hour * (Budgeted hours – Actual hours)
std rate = £2.5 (worked out as budgeted overhead £250k / budgeted hours below)
Budget Hours = 2,000,000 DVD's x 3 minutes each / 60 minutes per hour = 100,000 hours
Actual Hours = unknown from info supplied
The info states that the Capacity Variance is £12.5k favourable so
variance £12,500 / std rate £2.50 = 5000 hours
Summary
Budgeted hours 100,000 at std rate £2.50 per hour = £250,000
Actual hours 95,000 at std rate £2.50 per hour = £237,000
Favourable Varaince £12,500
or as per formula above £2.50 * (100,000  95,000) = £12,5000