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Unformatted text preview: controllable. F ixed costs
are static and unchanging once they are set.
T he variable overhead budget variance can be subdivided into a spending variance and an efficiency
variance. What is the difference? With the spending variance, you are comparing actual variable
overhead incurred to budgeted amount based on actual inputs.
Variable overhead spending variance = (Actual price per unit of the variable overhead base –
Standard price per unit of the variable overhead base) x Actual inputs
With the efficiency variance, you are comparing the budgeted amount based on actual inputs to the
budgeted amount based on standard (static) inputs allowed for the actual level of production.
Variable overhead efficiency variance = (Actual quantity of allocation base – Standard quantity of the
allocation base allowed for the actual level of output) x Standard variable overhead unit price
T hat’s it for the variable overhead! Now it’s on to the fixed overhead.
With fixed overhead, there is only one subdivision—the production volume variance. T here is no fixed
overhead efficiency variance because the amount of fixed overhead is unaffected by how efficiently
the allocation basis is used to produce output. And because there is no fixed overhead efficiency
variance, the fixed overhead spending variance and the fixed overhead flexible budget variance are
exactly the same!
T he production-volume variance is the only...
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- Spring '14
- Cost Accounting