Over head cost variance.

Question

Data of fixed overhead for a month . Budgeted overhead is Rs 100000, budgeted output 50000 units, actual output 54000 units , actual overhead spends Rs 120000. Over head cost variance.

 

A. Rs 8000f

B. Rs 4000A

C. Rs 20,000A

D. Rs 12,000A

Answer 1

Fixed overhead absorption rate

= Budgeted overhead ÷ Budgeted output

= 100,000 ÷ 50,000

= Rs 2 per unit

Absorbed fixed overhead for actual output

= 54,000 × 2

= Rs 108,000

Fixed overhead cost variance

= Absorbed overhead − Actual overhead

= 108,000 − 120,000

= Rs 12,000 Adverse

Why adverse:

Actual fixed overhead was more than the overhead absorbed into production, so it is an adverse variance.

So the correct answer is Rs 12,000 A.