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Over- or Under-Applied Overhead
- Measures if overhead was over or under applied during the period
- If total variance is unfavorable, overhead is under-applied
- If total variance is favorable, overhead is over-applied
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Controllable Overhead Variance
- Overhead variance that can be attributed to management's decisions
- Excludes volume variance as this is a non-controllable variance
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Total Manufacturing Cost Variance
- Sum of the total variance for all four cost groups
- Measures the total difference between actual spending and expected spending
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Example: Additional Variances
The following information is available from ABC Inc:
- Direct materials price variance: $1,000 F
- Direct materials quantity variance: $500 U
- Direct labor rate variance: $900 U
- Direct labor quantity variance: $1,000 U
- Variable overhead spending variance: $700 F
- Variable overhead efficiency variance: $900 F
- Fixed overhead spending variance: $300 F
- Fixed overhead volume variance: $1,200 U
Requirements
- Was overhead over-applied or under-applied and by how much?
- What is the controllable overhead variance?
- What is the total manufacturing cost variance?
Practice: Additional Variances
Romeo Inc. reported the following information in its variance report, some information is missing:
- Total direct material budget variance: $1,500 F
- Total direct labor budget variance: $1,200 F
- Variable overhead spending variance: $500 U
- Variable overhead efficiency variance: $1,000 F
- Fixed overhead spending variance: ?
- Fixed overhead volume variance: ?
- Controllable overhead variance: $800 F
- Overhead is under-applied by $200
Answer the following questions, do not use any symbols ($, %, !);
Use the first blank for the value and in the second blank enter F for favorable and U for unfavorable.
The fixed overhead spending variance is
The fixed overhead volume variance is
The total manufacturing cost variance is