Unformatted text preview: subdivision for fixed costs. It is important to note that the
volume variance is used only in relation to fixed costs.
Production volume variance = Budgeted fixed overhead – (Standard quantity of the allocation base
allowed for the actual level of output x Standard fixed overhead unit price)
When you combine the two variable subdivisions (spending and efficiency variances) with the one
fixed subdivision (volume variance), you have what is known as a 3-variance analysis.
When you combine these three subdivisions with the original basic level of analysis, you have what is
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4. Variable manufacturing overhead has no production-volume variance.
F ixed manufacturing overhead has no efficiency variance.
When all of the overhead variances are presented together, it is called a 4-variance analysis.
Not all managers need the same level of overhead analysis and, depending on the detail
desired or needed, a 1-, a 2-, or a 3-variance analysis may be used.
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- Spring '14
- Cost Accounting