Three-Way Variance

A. Method 1:

1. Spending variance:

Actual factory overhead xxx

Less: Budgeted allowance based on actual hours:

Fixed Overhead as budgeted (normal capacity) xxx

Variable overhead (actual. hours x variable rate) xxx xxx

Spending variance xxx

2. Idle capacity variance

Budgeted allowance based on actual hours xxx

Less: Actual hours x Standard rate xxx

Idle capacity variance xxx

3. Efficiency variance

Actual hours x standard rate xxx

Less: Standard factory overhead (Standard hours x Sta. FO rate) xxx

Efficiency variance - xxx

Net Overhead or Overall Overhead Variance (F)U xxx

B. Method 2 :

1. Spending variance:

Actual factory overhead xxx

Less: Budgeted allowance based on actual hours:

Fixed Overhead as budgeted (normal capacity) xxx

Variable overhead (actual. hours x variable rate) xxx xxx

Spending variance xxx

2. Variable efficiency variance

Budgeted allowance based on actual hours xxx

Less: Budgeted allowance based on standard hours:

Fixed Overhead as budgeted (normal capacity) xxx

Variable overhead (Std. hours x variable OH rate) xxx xxx

Variable efficiency variance xxx

3. Volume variance

Budgeted allowed based on standard hours xxx

Less: Standard factory overhead (Standard hours x Sta. FO rate) xxx

Volume variance - xxx

Net Overhead or Overall Overhead Variance (F)U