CA Intermediate · Cost and Management Accounting · Standard Costing
Meera Chemicals has a budgeted fixed overhead of Rs 6,00,000 for 20,000 units, a rate of Rs 30 per unit. Actual output was 18,500 units and actual fixed overhead was Rs 6,20,000. What is the fixed overhead expenditure variance and the volume variance respectively?
Fixed overhead expenditure variance is Rs 20,000 Adverse, because actual spending of Rs 6,20,000 exceeded the budget of Rs 6,00,000. Volume variance is Rs 45,000 Adverse, because output fell short by 1,500 units at Rs 30 per unit.
- ARs 20,000 Adverse and Rs 45,000 AdverseCorrect
- BRs 20,000 Favourable and Rs 45,000 Adverse
- CRs 20,000 Adverse and Rs 45,000 Favourable
- DRs 65,000 Adverse and Rs 45,000 Adverse
Explanation
Expenditure variance = budgeted 6,00,000 - actual 6,20,000 = Rs 20,000 Adverse. Volume variance = (actual output 18,500 - budgeted 20,000) x Rs 30 = Rs 45,000 Adverse. Total variance is Rs 65,000 Adverse, which is the sum and not a single variance.
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