ExpertMedium2 marksMultiple Choice
ACCA · Question 27 · Standard Costing
Section A
ShelterAid NGO budgeted 2,000 hours to build temporary shelters, absorbing fixed overheads at $15 per hour. Due to volunteer shortages, they only worked 1,800 hours. What is the fixed overhead volume capacity variance?
Section A
ShelterAid NGO budgeted 2,000 hours to build temporary shelters, absorbing fixed overheads at $15 per hour. Due to volunteer shortages, they only worked 1,800 hours. What is the fixed overhead volume capacity variance?
Answer options:
A.
$3,000 Favorable
B.
$3,000 Adverse
C.
$27,000 Adverse
D.
$30,000 Favorable
How to approach this question
Compare Budgeted Hours to Actual Hours. Multiply the difference by the Standard Fixed Overhead Absorption Rate.
Full Answer
B.$3,000 Adverse✓ Correct
Fixed OH Capacity Variance = (Actual Hours - Budgeted Hours) * Standard Rate. (1,800 - 2,000) * $15 = 200 hours shortfall * $15 = $3,000 Adverse. The organization failed to utilize its planned capacity.
Common mistakes
Confusing capacity variance with efficiency variance or expenditure variance.
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