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
Controllable Overhead Variance
- Overhead variance that can be attributed to management's decisions
- Excludes volume variance as this is a non-controllable variance
Total Manufacturing Cost Variance
- Sum of the total variance for all four cost groups
- Measures the total difference between actual spending and expected spending
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?