Alternative to total overhead variances, Cost Accounting

Alternative to Total Overhead Variances

There is an easier approach to overhead variances.  In this approach, the overheads are NOT sub-divided into their fixed and variable elements. Hence the specified variances are calculated as:

1129_Alternative to Total Overhead Variances.png

The variances indicated above are defined as follows:

1. Overhead Total Variance:  that is the difference between the standard overhead cost specified for the production achieved and the actual cost incurred.

2. Overhead Expenditure Variance: such is the difference between the budgeted overheads and the actual overheads expenditure.

3. Overhead Efficiency Variance:  such is the difference between the standard overhead rate for the actual hours taken and the standard overhead rate for the production achieved.

4. Overhead Volume Variance: such is the difference between the flexed budget allowance for the actual hours taken and the standard overhead cost of the actual hours taken.

Posted Date: 2/7/2013 7:32:44 AM | Location : United States







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