Managment accounting
- 1. Presentation on Overhead variance Submitted to – Submitted By- Mr. Sandeep Bisht Sir Shaifali Pandey MBAII Sem
- 2. An overhead cost variance is the difference between the amount of overhead applied during the production process and the actual amount of overhead costs incurred during the period. E.g: Effieciency variance and volume variance.
- 3. 1- Variable overhead: Variable overhead is the indirect cost of operating a business, which fluctuates with manufacturing activity. Eg: Electric bill and water bill.
- 4. A) Variable overhead cost variance This is the difference between the standard variable overhead for actual production and the actual variable overhead incurred. Formula - Actual Output x Standard Variable Overhead Rate – Actual Variable Overheads
- 5. B) Variable Overhead Expenditure Variance It is the difference between standard variable overheads allowed for actual hours worked and the actual variable overhead incurred. Formula - Actual hours worked x Standard variable overhead rate per hour – Actual variable overhead
- 6. The difference between the standard fixed overhead for actual output (i.e., fixed overhead that has been recovered) & the actual fixed overhead which has been incurred, is known as fixed overhead cost variance. Eg: Rent, sallaries, insurance.
- 7. A) Fixed overhead cost variance It is that portion of overhead cost variance which is due to over absorption or under absorption of overhead for the actual production. Formula: Actual Output x Stanadard Fixed Overhead Rate per unit – Actual Fixed Overheads
- 8. This Variance is the difference between the budgeted fixed overheads and the standard fixed overheads recovered on the actual production. Formula : Volume Variance = Actual Output x Standard Rate – Budgeted Fixed Overheads (or) Standard Rate (Actual Output – Budgeted Output)
- 9. For example: a company budgets for the allocation of 25,000 of fixed overhead costs to produced goods at the rate of ₹ 50 per unit produced, with the expectation that 500 units will be produced. However, the actual number of units produced is 600, so a total of 30,000 of fixed overhead costs are allocated. This creates a fixed overhead volume variance of 5,000