Chapter 23, Problem 18E

To determine

Variable Overhead Cost Variance:

The overhead cost which varies with the level of activity is called a variable overhead cost. At the actual hours of allocation base, the difference between the actual variable overhead cost and budgeted variable overhead cost is called variable overhead cost variance.

Variable Overhead Efficiency Variance:

Variable overhead efficiency variance is the difference between the actual hours of allocations base and the budgeted hours of allocation base allowed at the standard rate.

Fixed overhead spending variance:

At the actual labor hours, the difference between the budgeted fixed overhead cost and the actual fixed overhead cost is called fixed overhead budget variance.

Fixed overhead volume variance:

The difference between the budgeted fixed overhead cost and the applied fixed overhead cost is called fixed overhead volume variance. The sole reason for this kind of variance is the difference in the actual and projected activity.

Controllable Variance:

The overall variance which comprises of variable overhead spending and efficiency variance and the fixed overhead spending and volume variance is called the controllable variance. It is basically the combination of variable and fixed overhead which the management of a company can influence.

To determine:

Computation of Variances

1. Variable overhead spending and efficiency variances.

2. Fixed overhead spending and volume variances.

3. Controllable variance