The overhead budget for Hugh Demand Ltd for the year to 30 June 2016 wasestimated on 20,000 direct labour hours.

Using this base, the overhead recovery rate per direct labour hour was determined as:

Fixed costs ($216,000)   $10.80

Variable costs $ 8.10

   $18.90

Actual results achieved for the year were:

Fixed costs $220,500

Variable costs $170,940

Direct labour hours 21,000 hours

Required:

Calculate the factory overhead spending (budget) variance and capacity(volume) variance.

Specify whether the Spending Variance and the Capacity Variance are Favourable orUnfavourable.

Your answer:

Actual		Flexible Budget					Applied
$		Fixed		$			hrs x $
$		Variable		$
$				$			$
	$			$
	Overhead Spending Variance			Overhead Capacity Variance
			$
			Over applied Total Variance

Answer rating: 100% (QA)

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