Discussion and calculation of overhead variances

(a) Explain fully how the variances between actual and standard production overhead costs may be analysed, where overhead absorption is based upon separate direct labour hour rates for variable and fixed overheads.

(12 marks)

(b) Calculate fixed production overhead variances in as much detail as possible, in the following situation:

The company operates a process costing system. At the beginning of the period 42000 half completed units were in stock.
During the period 680000 units were completed and 50000 half completed units remained in stock at the end of the period.

Transcribed Image Text:

Fixed overhead () Direct labour (hours) Output (units) Budget Actual 246 000 259 000 123 000 141 000 615000 (see below)