Direct labour - 8% of sales value. Direct material - 50% of sales value. Variabl

Question

Direct labour - 8% of sales value. Direct material - 50% of sales value. Variable production overhead - 8% of sales value. Fixed production overhead - 12% of sales value. Admin overhead - 5% of sales value.

(Year estimations & figures) - 80 employees, 2000 hours worked by each employee, 40000 gearboxes manufactured in year as budgeted production & a £200/unit selling price.
(after 1 year extracted info) - labour cost £4.40/hr, 32000 units sold, £210.00/unit selling price, 160000 hours worked, variable production overheads £640000, fixed production overheads £810000, admin cost £350000, raw material prices 10% higher than expected & total raw material expenditure was £3.696 Million.

I need to find the following

(Variable overheads) - Expenditure variance & efficiency variance.

(Fixed overheads) - Expenditure variance & Volume variance.

(Admin overheads) - Expenditure variance & volume variance

Explanation / Answer

A Standard Hours for Actual Production 128000 B Standard Rate 16 C Actual Output 32000 D Actual Rate 20 E Actoual Variable Over head 640000 Variable Overheads Expenditure Variance ((CxB)-(E ) -128000 Adverse Efficiency Variance ((AxB) -(CxB ) 1536000 Favourable Fixed Overhead Expenditure Variance (40000x200x12% -810000) 150000 Favourable Volume Variance (40000-32000)x24 192000 Favourable Admin Overhead Expenditure Variance (40000x200x5% -350000) 50000 Favourable Volume Variance (40000-32000)x10 80000 Favourable

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