A company manufactures a single product, and relevant data for December is as follows.
Budget/standard
Actual
Production units
1,800
1,900
Labour hours
9,000
9,400
Fixed production overhead
$36,000
$39,480
What are the fixed production overhead capacity and efficiency variances for December?
Capacity
Efficiency
$1,600 (A)
$400 (F)
$400 (A)
$1,600 (F)
The correct answer is:
Capacity variance
Budgeted hours of work
hours
Actual hours of work
Capacity variance in hours
hours (F)
x standard fixed overhead absorption rate per hour *
Fixed production overhead capacity variance
(F)
* $36,000/9,000 = $4 per hour
Efficiency variance
1,900 units of product should take (´ 9,000/1,800 hrs)
but did take
Efficiency variance in hours
Fixed production overhead efficiency variance in $
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