Estimate fixed overhead variances, Cost Accounting

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Estimate Fixed Overhead Variances

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Referring to data, we can estimate the fixed overhead variances as given below:

Budget for December 2003;

Shs.

Fixed Overheads

11,480

Variable Overheads

13,120

Labour Hours

3,280 hours

Standard Hours of Production

3,280 hours

Actual Results for December 2003

Shs.

Fixed Overheads

12,100

Variable Overheads

13,930

Actual Labour Hours

3,150/hours

Standard Hours of Production

3,280 hours

Fixed Overhead Expenditure Variance is:

=  Actual Fixed Overheads - Budgeted Fixed Overheads

= Shs.12,100 - Shs.11,480 = Shs.620  (Unfavourable)

Fixed Overhead Capacity Variance is:

= Budgeted fixed Overheads - (Actual Hours x F.O. A. R)

=  Shs.11,480 - (3,150 x 3.5) = Shs.455 Unfavourable

Fixed Overhead Efficiency Variance is:

=  (Actual Hours x F.O.A.R) - (Standard Production Hours x F.O.A.R)

= (3,150 X 3.5) - #,230 X 3.5) = Shs.280 Favourable.

Fixed Overhead Volume Variance is:

= Fixed Overhead Capacity Variance + Fixed Overhead Efficiency Variance.

= 455 (U) + 280 (F) = Shs.175 (Unfavourable)

Fixed Overhead Variance is:

= Fixed Overhead Expenditure Variance + Fixed Overhead Volume Variance

= Shs.620 (Unfavourable) + Shs.175 (Unfavourable)

= Shs.795 (Unfavourable).

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