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Fixed overhead production volume variance.

  • 1.  Fixed overhead production volume variance.

    Posted 05-13-2023 03:42 AM

    A company ends the month with a volume variance of $6,360 unfavorable. If budgeted fixed O/H 
    was $480,000, O/H was applied on the basis of 32,000 budgeted machine hours, and budgeted variable O/H was 
    $170,000, what were the actual number of machine hours (AH) for the month?
    A. 32,425
    B. 32,318
    C. 32,000
    D. 31,576
    Answer is D.

    Anyone please help me understand this question. While I do the calculation according to the formula I'm getting 31,576 as the standard hours. But the answer shows 31576 as the actual hours. Help me please understand the question.



    ------------------------------
    Ron Thomas
    Palakkad
    India
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  • 2.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 01:24 AM

    Fixed overhead production volume variance =( AH-SH)*SP 
    6,360 = (AH-32000) 15 per H 



    ------------------------------
    Mahmoud Badr
    Director/Manager
    Doha
    Qatar
    ------------------------------



  • 3.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 01:43 AM


    A. 32,425 
    production volume variance = fixed overhead budget - ( rate )x actual hour  
    -6360 = 480000-15xa
    -6360= 48000-15a
    -6360-480000= -15a
    -486360/15 =a
    a= 32425 






  • 4.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 03:01 AM

    Hi ,
    Given Volume variance Unfavorable $6,360/-.
    Thus, in terms of Hours it is 6,360/15 = 424 hours.
    given, budgeted machine hours 32,000  and hence, The SH allowed for actual production (SH) will be 31,576  [ i.e.32,000-424 hours ]



    ------------------------------
    Kishore Kumar N
    Bengaluru
    Karnataka
    India
    ------------------------------



  • 5.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 03:36 AM

    The question has asked for actual hours, not standard hours which is what is confusing me.



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    Ron Thomas
    Palakkad
    India
    ------------------------------

    Original Message


  • 6.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 03:54 AM
    Hi,
    I have one point to ask here to you.
    Do you have to use Actual hours used in calculating the volume variance?
    It is for the actual production units the standard hours allowed for that actual production is used in the formula.I.e. SH.
    Here,SH in the formula  means standard hours used for actual production units..
    Thanks





    Original Message


  • 7.  RE: Fixed overhead production volume variance.

    Posted 05-15-2023 07:24 AM
    (actual hrs - standard hrs) = 424
    actual hrs = 424+32000
    so according to equation it will be 32424
    but why should we reduce it , and as they have mentioned in question its unfavourable actual hrs should atleast be more than 32000,how come its 31576



    Original Message


  • 8.  RE: Fixed overhead production volume variance.

    Posted 05-18-2023 06:35 AM
    Yes 



    Original Message


  • 9.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 08:21 AM

    480000+6360= 486360 / 15 fixe OH rate = 32425 hours





    ------------------------------
    Shah Mahmood Musakhil
    Student
    Elkridge MD
    United States
    ------------------------------

    Original Message


  • 10.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 10:49 PM
    as they have mentioned its unfavourable ,so actual hours used will be atleast above 32000 , how come its 31576, if its 31576 it would be favourable.
    please contact me if this is wrong is correct





  • 11.  RE: Fixed overhead production volume variance.

    Posted 05-14-2023 11:18 PM
    So what's the correct answer?



    Original Message


  • 12.  RE: Fixed overhead production volume variance.

    Posted 06-06-2023 03:19 AM
    Hi Ron

    Your doubt is correct.  The question should have been standard hours and not actual hours.  Volume variance helps to compare Standard hours for actual production and the Budgeted hours for the period.

    CA L.Muralidharan
    6383228202
    Chennai





  • 13.  RE: Fixed overhead production volume variance.

    Posted 06-07-2023 09:00 AM

    Spending Variance SR( AQ-SQ)
    -6360 15(X-32000)
    -424 X-32000
    X 31576
    SR Fixed                480,000             15
    Budget Capacity 32000


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    Muhammad Aslam
    Accountant
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    Original Message


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