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OVERHEAD VARIANCES
Unlike labour and direct material, the manufacturing overhead is not completely variable with the level of production. So, standard costs for factory overheads are based upon budgets rather than standards. These variances happen due to the differences between the standard overhead cost charged and the actual overhead cost incurred to production. There are two components to overhead variances -
i) Fixed Overhead Variances and
ii) Variable Overhead Variances
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Marginal analysis finds to equalize the cost of producing one more item (marginal costs) with the revenue gained from selling one more item (marginal revenue).
entries to be entered into a ledger account for the month of July 2009 & prepare an incoem statement. balances at 1/7/2009 Materials control $6150 Labour control (accrued wages)
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