Q14RQ - Horngren'S Financial And Managerial Accounting

Question

Question: List the variable overhead variances, and briefly describe each

Step-by-Step Solution

Answer

Answer

The variable overhead variances can be in the form of variable overhead cost variance and variable overhead efficiency variance.

Step 1 Definition of the variable overhead

Variable overhead is the cost incurred by the company for operating the business, which changes with the change in production and sales.

Step 2 Variable overhead variances

The Variable overhead variances are as follows:

1. Variable overhead cost variance: The variable overhead cost variance measures how well the company keeps the variable overhead cost per unit within the standards.
2. Variable Overhead Efficiency Variance: The variable overhead efficiency variance shows how well the company uses the allocation base for the variable overhead within the standard.