Page 237 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Fixed Overhead Calendar Variance = Standard fixed overhead rate × (Budgeted
quantity – Revised budgeted quantity)
OR = (Standard No. of working days – Actual No. of working days) ×

Totalfixedoverheadsinthebudgetperiod
Std.No.ofdaysinthebudgetperiod

OR = Standard rate per hour or per day × Excess or deficit hours or days
worked

Verification:
Overhead Variance = Variable overhead variance + Fixed
overhead variance

Variable Overhead Variance = Expenditure variance + Volume
variance
Fixed Overhead Variance = Expenditure variance + Volume
variance
Fixed Overhead Volume Variance = Efficiency variance + Capacity variance
+ Calendar variance

Problem 4:
From the following data, calculate overhead variances:

Materials handling ` 8,325
Idle time ` 850
Re-work ` 825
Overtime premium ` 250
Supplies ` 4,000
Total ` 14,250

Fixed overhead items: (Actual)
Supervision ` 1,700
Depreciation on plant ` 2,000
Depreciation on equipment ` 5,000
Rates ` 1,150
Insurance ` 350
Total ` 10,200

Normal capacity 10,000 standard hours, budgeted rate ` 1.70 per standard hour for variable
overhead and ` 1 per standard hour for fixed overhead. Actual level: 8,000 standard hours.
Solution:

Variable and Fixed Overhead Variances:
(a) Variable Overhead Cost Variance:
VOCV = (Recovered variable overheads – Actual variable overheads)
VOCV = (8,000 × 1.70) – 14,250

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