The total overhead cost variance is the difference between the standard cost of overhead allowed for the actual output achieved and the actual overhead cost incurred. In other words, overhead cost variance is the under or over absorption of overheads.<\/p>\n\n\n\n
However before we proceed to study these variances, we should aware about the basic terms used in the computation of overhead variance:<\/p>\n\n\n\n
Standard overhead rate (per unit) = Budgeted overhead \/ Budgeted output in units<\/p>\n\n\n\n
Standard overhead rate (per hour) = Budgeted overhead \/ Budgeted hours<\/p>\n\n\n\n
Standard hours for actual output = Budgeted hours \/ Budgeted output x Actual output<\/p>\n\n\n\n
Standard output for actual hours = Budgeted output (in units) \/ Budgeted hours x Actual hours<\/p>\n\n\n\n
Absorbed (or Recovered) overhead = Standard Rate per hour \u00d7 Actual Output Or standard rate per unit \u00d7 standard hours for actual output<\/p>\n\n\n\n
Budgeted overhead = Budgeted output \u00d7 Std. overhead rate per unit Or Budgeted hours \u00d7 Std. overhead rate per hour<\/p>\n\n\n\n
(vii) Standard overhead = Std. output for actual time \u00d7 Std. overhead rate per unit Or Actual hours \u00d7 Std. overhead rate per hour<\/p>\n\n\n\n
Actual overhead = Actual output \u00d7 Actual overhead rate per unit Or Actual overhead = Actual output \u00d7 Actual overhead rate per unit<\/p>\n\n\n\n
Overhead Cost Variance<\/strong><\/p>\n\n\n\n[Actual Output \u00d7 Standard Overhead Rate per Unit] \u2013 Actual Overhead Cost<\/p>\n\n\n\n OR<\/p>\n\n\n\n[Standard Hours for Actual Output \u00d7 Standard Overhead Rate Per Hour] \u2013 Actual Overhead Cost<\/p>\n\n\n\n Overhead cost variances can be classified as:<\/strong><\/p>\n\n\n\n The total overhead cost variance is the difference between the standard cost of overhead allowed for the actual output achieved and the actual overhead cost incurred. In other words, overhead cost variance is the under or over absorption of overheads. However before we proceed to study these variances, we should aware about the basic terms…<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-107259","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"\n