Question
A labour-intensive production unit operating a standard absorption cost accounting system provides the following information for period 10: Normal capacity, in direct labour hours 9,600
A labour-intensive production unit operating a standard absorption cost accounting system provides the following information for period 10:
Normal capacity, in direct labour hours 9,600
Budgeted variable production overheads Rs 3 per direct labour hour
Budgeted fixed production overheads per four-week Rs 120,000
financial period
To produce one unit of output takes two hours of working.
Actual figures produced for the four-week period 10 were:
Production, in units 5,000
Variable production overheads incurred Rs 28,900
Fixed production overheads incurred Rs 118,000
Actual direct labour hours worked 9,300
You are required to calculate, in accordance with the 1996 edition of the Institute's Terminology,
the following variances:
(a) variable production overhead expenditure variance,
(b) variable production overhead efficiency variance,
(c) fixed production overhead expenditure variance, and
(d) fixed production overhead volume variance.
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