26 Aug For variable manufacturing overhead, there is no: A spending variance B flexible-budget variance C efficiency variance D production-volume variance

An example is the https://quick-bookkeeping.net/ of the electricity needed to operate the machines that cut and sew the denim. Another example is the cost of the manufacturing supplies that increase when production increases. We will assume that these variable manufacturing overhead costs fluctuate in response to the number of direct labor hours.

• Further investigation of detailed costs is necessary to determine the exact cause of the fixed overhead spending variance.
• Manufacturing overhead variances is broken out into both variable and fixed overhead variances.
• Standard costing allows management to determine areas that deviate from established standards, to be able to investigate and take corrective actions.
• Because fixed overhead costs are not typically driven by activity, Jerry’s cannot attribute any part of this variance to the efficient use of labor.

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Step 1: Definition of Variance Analysis

The difference between actual costs for variable overhead and budgeted costs based on the standards. Variable overhead spending variance is unfavorable if the actual costs are higher than the budgeted costs. Note that the „hour“ used refers to direct labor hour or machine hour, depending upon which is used by the company.

• A more efficient use of fuel and power resources in production facility.
• Assume that the cost accounting staff of Company X has calculated that the company’s production staff works 10,000 hours per month.
• Planning and control of variable manufacturing overhead costs has both a​ long-run and a​ short-run focus.
• A variable manufacturing overhead efficiency variance indicates whether more or less of the chosen allocation base was used than was budgeted for the actual output achieved.

Recall the following information in our Standards Table in Part 1. Recall from Figure 10.1 „Standard Costs at Jerry’s Ice Cream“ that the variable overhead standard rate for Jerry’s is $5 per direct labor hour and the standard direct labor hours is 0.10 per unit. Review this figure carefully before moving on to the next section where these calculations are explained in detail.

Question: 8-21. VARIABLE MANUFACTURING OVERHEAD, VARIANCE ANALYSIS.

This information can be used to perform Variable Manufacturing Overhead Variance Analysis overhead cost variance analysis. Manufacturing companies are required to assign fixed manufacturing overhead costs to products for financial reporting purposes . The difference between the budgeted and applied fixed overhead costs. Controlling overhead costs is more difficult and complex than controlling direct materials and direct labor costs.