Question 1

A textile manufacturer has a budgeted fixed overhead of $80,000 and budgeted labor hours of 8,000. During the period, actual labor hours worked were 8,500.

Calculate the fixed overhead capacity variance. State your answer as a number followed by 'A' or 'F' (e.g., 5000 F).

Accepted Answer

1. Calculate the standard fixed overhead absorption rate (OAR) per hour. 2. Find the difference between actual hours worked and budgeted hours. 3. Multiply the difference by the OAR.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing capacity variance with efficiency or volume variance.

A textile manufacturer has a budgeted fixed overhead of $80,000 and budgeted labor hours of 8,000. During the period, actual labor hours worked were 8,500.

Calculate the fixed overhead capacity variance. State your answer as a number followed by 'A' or 'F' (e.g., 5000 F).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 4

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