Question
Download Solution PDFComprehension
Read the following passage carefully and answer the question.
XYZ Ltd. funrnished you with the following information:
| Budget | Actual (in a particular month) | |
| No. of working days | 25 | 27 |
| Production (in units) | 20,000 | 22,000 |
| Fixed overhead (in Rupees) | 30,000 | 31,000 |
Budgeted overhead rate is Rs. 1 per unit. In a particular month the actual hours worked were 31,500.
From given information in the passage, what is the volume variance of XYZ Ltd in given month?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Rs. 3,000 (Favourable)
Key PointsVolume Variance:
- The difference between the actual amount sold or consumed, and the budgeted amount expected to be sold or consumed, multiplied by the standard price per unit, is referred to as a volume variance.
- This variation is used as a broad indicator of whether a company is producing the expected amount of unit volume.
Important Points Volume Variance = Actual Output x Standard Rate - Budgeted fixed Overheads
Volume Variance = 22000 x 1.5 = 30000
Volume Variance = 33000 - 30000
Volume Variance = ₹ 3000 (Favourable)
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