Volume variances = Recovered overheads - Budgeted overheads.Expenditure variance = Budgeted overheads - Actual overheads.Fixed overhead cost variance = Recovered fixed overheads - Actual fixed overheadsįixed overhead cost variance consists of:.Variable overhead cost variance = Recovered variable overheads - Actual variable overheads. The total overhead cost variance may be separated into: Total overhead cost variance = Recovered overheads - Actual overheads The different overhead variances can now be specified as follows: Actual Overheads = Actual rate per unit x Actual output.= Standard rate per hour x Actual hours.Standard overheads = Standard rate per unit x Standard output for actual time.= Standard rate per hour x Budgeted hours.Budgeted overheads = Standard rate per unit x Budgeted output.Recovered or absorbed overheads = Standard rate x Actual output.Standard output for actual time = (Budgeted output / Budgeted hours) x Actual output.Standard hours for actual output = (Budgeted output / Budgeted hours) x Actual output.Standard rate per hour = Budgeted overheads / Budgeted hours.Standard rate per unit = Budgeted overheads / Budgeted output.The formulas that are useful for calculating different overhead variances are as follows: The difference between the standard and actual quantities usedīy contrast, efficiency variance measures efficiency in the use of the factory (e.g., machine hours employed in costing overheads to the products).The differences between the standard prices and the actual prices of manufacturing overhead materials and services.This variance can be compared to the price and quantity variance developed for direct materials and direct labor.īudget or spending variance measures the following: Total overhead cost variance can be subdivided into budget or spending variance and efficiency variance.īudget or spending variance is the difference between the budget and the actual cost for the actual hours of operation. This is because the responsibility for overhead costs is difficult to pin down. Controlling overhead costs is more difficult and complex than controlling direct materials and direct labor costs.
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