Variance Analysis

How to calculate variable Overhead Efficiency Variance?

Variable overhead efficiency variance is the difference between actual hours worked at standard rate/price and standard hours allowed on standard rate/price. The standard hours are the total number of hours required to complete the production target during a particular period. For example, standard labor hours to produce an iPhone is 10 hours. This is an …

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How to calculation of Overhead Spending Variance?

The difference between actual variable manufacturing overhead incurred during the period and actual hours worked during the period on standard variable overhead rate is known as overhead spending variance. From the calculation of overhead spending variance formula, you will get either favorable or unfavorable result. Like if your company’s actual manufacturing overhead is higher than …

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How to Calculate Direct Labor Rate Variance? The calculation, Example, And Analysis

The difference between the actual direct rate and standard labor rate is called direct labor rate variance. Direct labor variance is a management tool to compare the budgeted rate set for direct labor at the start of production with the actual labor rate applicable during the production period. Management can revise their budgeted rate if …

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How to Calculate Sales Price Variance? The formula, Example, And Analysis

Sales Price Variance occurs when the actual selling price of a commodity or service differs from the standard selling price set by the management, which is an estimated selling price decided beforehand. It is not possible that businesses will always attain the standard and budgeted sales data. The actual price can vary due to market …

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Importance and limitation of fixed overhead spending variance

Definition: Fixed overhead spending or expenditure variance is the difference between actual fixed overheads incurred by the company and the budgeted fixed overheads that were estimated by the company before the year started. It can be calculated as follows: Actual overheads – budgeted overheads = Fixed overhead spending variance Analysis: A favorable fixed overhead spending …

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Importance and limitations of variable overhead spending variance

Variable Overhead Spending Variance: Variable overheads are indirect variable expenses i.e. they can’t be traced back to one unit of production; depreciation expense of plant and machinery, for example. Variable Overhead Spending Variance is the deviation in the expense incurred regarding variable overheads than what was expected. It calculates the difference between actual variable overheads …

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Importance and limitation of variable overhead efficiency variance

Variable overhead efficiency variance: A variable overhead efficiency variance exhibits the difference between budgeted variable overheads and applied variable overheads. In other words, it is the difference between standard hours and actual hours worked at the standard variable overhead rate. It helps identify the cost saved or incurred by the company due to efficiency or …

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Importance and limitation of fixed overhead total variance

Fixed overhead total variance: A variance is the difference between actual cost/revenue and budgeted cost/revenue. Fixed overhead total variance measures the difference between actual fixed overheads and absorbed fixed overheads. Absorbed or applied overheads are defined as the fixed overheads that the company was able to recover. They are calculated by applying the fixed overhead …

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