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CMA Intermediate · Management Accounting · Standard Costing and Variance Analysis (Management Accounting)

Gupta Textiles Ltd budgeted fixed overheads of ₹3,60,000 for 30,000 standard hours (₹12 per hour) and 6,000 units. Actual output was 6,300 units, with actual hours worked of 31,000. Standard hours allowed per unit are 5. What is the fixed overhead volume variance?

The fixed overhead volume variance is ₹18,000 Favourable. Standard hours for actual output are 6,300 × 5 = 31,500, against budgeted 30,000 hours. The 1,500 excess hours at ₹12 per hour equal ₹18,000, favourable because output exceeded budget.

  1. A₹12,000 Adverse
  2. B₹18,000 FavourableCorrect
  3. C₹6,000 Favourable
  4. D₹24,000 Favourable

Explanation

Standard hours for actual output = 6,300 × 5 = 31,500. Volume variance = (31,500 − 30,000) × 12 = ₹18,000 Favourable. Using actual hours worked (31,000) gives ₹12,000, which is only the capacity portion and not the volume variance.

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