In The Name Of Allah, The Most Magnificent, The Most Merciful

THREE VARIANCE
Presented by

Sajid Mehmud

SEQUENCE

Introduction Definition Spending Variance Idle Capacity Variance Efficiency Variance Questioning and Answering

FACTORY OVERHEAD VARIANCE

DEFINITION

Overhead actually incurred is compared with the expenses charged into process using standard FOH rate. The difference between two figures is called Factory overhead variance.

Types (03)
(a) (b) (c)

Spending Variance The capacity Variance Efficiency Variance

SPENDING VARIANCE
It is difference between actual expenses incurred and budgeted allowance based on actual hours
Actual Factory Overhead Budgeted Allowance based on (Actual hours worked) Fixed expense budgeted Variable (Actual hrs X Variable Overhead rate) XXX XXX

Spending variance

XXX

XXX

XXX

IDLE CAPACITUY VARIANCE

It is difference between budgeted allowance (based on actual hours) and actual hrs worked multiplied by standard overhead rate
Budgeted Allowance based on (Actual hours worked) XXX
Idle capacity variance

Fixed expense budgeted Variable expense (Actual hrs X Variable Overhead rate)

XXX XXX XXX

EFFICIENCY VARIANCE
It is difference between actual hrs worked multiplied by standard overhead rate and standard hrs allowed times the standard overhead rate
Actual hrs X standard overhead rate XXX
Efficiency variance

Overhead charged to production

XXX

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