Chapter 23, Problem 18QS

To determine

Concept Introduction:

Variable overheads are the expenses which are incurred by the company other than Direct Material Cost and Direct Labour Cost. As the name denotes this cost is variable in nature, i.e.,it varies with the volume of production.

The difference between the Standard Variable Overhead and the Actual Variable overhead is the Variable Overheads Variance.

Like Labour Cost Variance, Variable Overhead variance may be caused because of either change in rate per hour or change in number of hours from the standard time.

Thus Variable Overhead Cost Variance is the sum of Variable Overhead expenditure variance and Variable Overhead Efficiency Variance.

The following are the formulas for the same:

Variable Overhead Cost Variance (VOCV) = Variable Overhead expenditure variance + Variable

Overhead Efficiency Variance

Also, Variable Overhead Cost Variance (VOCV) = Standard Variable Overhead Cost (SVOC) − Actual

Variable Overhead Cost(AVOC)

Variable Overhead Cost Variance