Concept explainers
Concept Introduction:
Variable overhead cost variance:
Variable overhead cost variance can be defined as difference in the standard variable
Variable overhead cost variance is calculated as under –
Variable overhead efficiency variance:
Variable overhead efficiency variance can be defined as difference between the standard hours or standard basis of use and actual hours or actual basis of use
Variable overhead efficiency variance is calculated as under –
Fixed overhead cost variance:
Fixed overhead cost variance can be defined as difference in the standard fixed overheads and actual fixed overheads.
Fixed overhead cost variance is calculated as under –
Fixed overhead volume variance:
Fixed overhead volume variance can be defined as difference between fixed overhead for standard output and fixed overhead for actual output.
Fixed overhead volume variance is calculated as under –
To compute:
1. Variable Overhead cost variance
2. Variable overhead efficiency variance
3. Fixed Overhead Cost variance
4. Fixed overhead volume variance
Requirement 2
To explain:
Why the variances are favourable or unfavourable
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