ACCA MA · Chapter 13 · Question 3 of 10
Fixed overheads are absorbed at $8 per direct labour hour. Budgeted hours were 15,000, actual hours worked were 15,600, and the standard hours for actual output were 15,300. What is the fixed overhead capacity variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $4,800 favourable
Explanation
Capacity variance = (actual hours - budgeted hours) x OAR = (15,600 - 15,000) x 8 = $4,800 favourable, because more hours were worked than budgeted. The efficiency variance = (15,300 - 15,600) x 8 = $2,400 adverse. Together they make up the volume variance of $2,400 favourable.
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