The budgeted capacity of a factory per month of 25 days was 2,00,000 hours and the budgeted fixed overheads were 22,40,000. The management increased the capacity by 20% in the beginning of October, 2000, the actual number of working days in that month were 23. Compute the variance that emerge. Budgeted fixed overheads recovery rate 21.20 1.e. 2.40,000/2,00,000 Actual production in terms of hours (2,00,000 + 20%) * 23/25 or 2.20,800 Volume Variance: Fixed overheads absorbed on 2,20,800 hours @ 21.20 per hours 2,64.960 Budgeted fixed overheads 12,40,000 Volume Variance 24,960 (F) (or 20,800 hours @ 21.20) Analysis Capacity Variance: Production in terms of hours at new capacity - i.e. 2,00.000 + 20% Fixed overheads absorbed @of 21 20 per hour Fixed overheads, budgeted Hrs. 2.40,000