Anticipated production is 7,500 direct labor hours. Show Fixed OH budgeted to be $60,000. Actual Output 6,000 Standard Labor Hours (3,000 units) Actual Variance OH Expense $30,600 Actual Fixed OH Expense $62,000 Bought and used 12,000 lbs. @ $17 lb. $204,000 Paid for 6,500 hrs. of Direct Labor $13,000 D.M. Price Variance (17-15) 12,000 = 24,000 UNF D.M. Usage Variance (12,000-12,000)(15) = 0 D.L. Price Variance (21-20)(6,500) = 6,500 UNF D.L. Efficiency Variance (6,500-3,000(2))(20) =10,000 UNF Fixed OH Flexible Budget Variance Actual Cost - Budget based on standard inputs allowing for actual outputs achieved 62,000 - 60,000 = 2,000 UNF (Fixed irrespective of volume) Fixed OH Production Volume Variance Budgeted Cost - Fixed OH Applied 6,000 6,000(8) = 12,000 U Variable OH Flexible Budget Variance Actual V OH Cost - Budget Based on Standard Inputs Allowed for Outputs Achieved 30,600 6,000(5) = 600 U Variable OH Applied Budget Applied 6,000(5) 6,000(5) = 0 Analysis - OH Spent $92,600 - Should have if within budget 6,000(8+5) = $78,000 14,600 U Because worked at 6,000 instead of 7,500, did not absorb the Fixed OH fully. Fixed 60,000 (Budget) - 6,000(8) = 12,000 not absorbed 62,000 Actual - 60,000 (Budget) 2,000 spent more than budget 14,000 Variable 30,600 Actual - 20,000 (should have spent per budget) = 600 30,000 should have spent if - 6,000(5) - V.OH = -0- standard was met applied TOTAL = 14,600 What is the formula for overhead volume variance?It can be calculated using the following formula: Fixed Overhead Volume Variance = Applied Fixed Overheads – Budgeted Fixed Overhead. Here, Applied Fixed Overheads = Standard Fixed Overheads × Actual Production.
When actual fixed overhead cost is less than budgeted fixed overhead cost the budget variance is labeled?If the actual fixed overhead cost exceeds the budgeted fixed overhead cost, the budget variance is labeled unfavorable. If the actual fixed overhead cost is less than the budgeted fixed overhead cost, the budget variance is labeled favorable.
What is overhead volume variance?Fixed overhead volume variance is the difference between the amount budgeted for fixed overhead costs based on production volume and the amount that is eventually absorbed.
What causes production volume variance?Definition of Production Volume Variance
This variance arises when there is a difference in the following amounts: The manufacturer's budgeted amount of fixed manufacturing overhead costs. The amount of the fixed manufacturing overhead costs that were assigned to (or absorbed by) the company's good output.
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If less overhead is applied than was budgeted, the production volume variance is
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