--%>
Assignment Help - homework help

  Overhead Variances

Introduction to Overhead Variances

The overhead variances depict the variation among the standard overhead cost and the actual overhead cost. In case of direct labour variances and direct material, there is no question of dividing them into fixed and variable like the direct material and direct labour costs are variable. Though, in case of overheads, it is essential to split them into fixed and variable for calculation of variances. We will take up the fixed overhead variances first and secondly the variable overhead variances.

I] Fixed Overhead Variances:

The following variances are calculated in case of fixed overheads.

Ø  Fixed Overhead Cost Variance:

This variance indicates the variation among the standard fixed overheads for actual production and the actual fixed overheads incurred. In fact this variance denotes the under/over absorbed fixed overheads. It denotes the under absorption of fixed overheads if the actual overheads acquired are more than the standard fixed overheads, and the variance is favourable. Alternatively, if the actual overheads acquired are more than the standard fixed overheads, it denotes the over absorption of fixed overheads and the variance is adverse. The following formula is employed for computation of this variance.

Fixed Overhead Cost Variance:

Standard Fixed Overheads for Actual Production - Actual Fixed Overheads.

Ø  B. Fixed Overhead Expenditure/Budget Variance: 

This variance denotes the variation among the budgeted fixed overheads and the actual fixed overhead expenses. If the actual fixed overheads are more than the budgeted fixed overheads, it is an adverse variance as it means overspending as compared to the budgeted amount. Alternatively, if the actual fixed overheads are less than the budgeted fixed overheads, it is a favourable variance. This variance is calculated with the help of the following formula.

Fixed Overhead Expenditure Variance: Budgeted Fixed Overheads - Actual Fixed overheads

Ø  Fixed Overheads Volume Variance:

This variance denotes the under/over absorption of fixed overheads because of the variation in the budgeted quantity of production and actual quantity of production. If the actual quantity produced is more than the budgeted one, this variance will be positively but it will point out over absorption of fixed overheads. Alternatively, if the actual quantity produced is less than the budgeted one, it denotes adverse variance and there will be within absorption of overheads. The formula for computation of this variance is as displayed below:

Fixed Overhead Volume Variance: Standard Rate [Budgeted Quantity - Actual Quantity]

Reconciliation I = Fixed Overhead Cost Variance = Expenditure Variance + Volume Variance

Ø  Fixed Overhead Efficiency Variance:

It is that portion of volume variance that arises because of the variation among the output actually acquired and the output which should have been acquired in the actual hours worked. This variance will be positive it the actual production is more than the standard production in actual hours. The formula for computation of this variance is as follows:

Fixed Overhead Efficiency Variance: Standard Rate [Standard Production - Actual production]

Ø  Fixed Overhead Capacity Variance:

This variance is also that portion of volume variance that arises because of the variation among the capacity utilization, that is the capacity in fact utilized and the budgeted capacity. If the capacity utilization is more than the budgeted capacity, the variance is favourable, if not it will be adverse. The formula is as follows:

Fixed Overheads Capacity Variance: Standard Rate [Standard Quantity - Budgeted Quantity]

Reconciliation II = Volume Variance = Efficiency Variance + Capacity Variance

Ø  Fixed Overhead Revised Capacity Variance:

This variance denotes the variation in capacity utilization because working for more or less number of days than the budgeted one. The computation of this variance is completed through using the following formula.

Fixed Overhead Revised Capacity Variance = Standard Rate [Standard Quantity - Revised Budgeted Quantity]

Ø   Fixed Overheads Calendar Variance:

This variance denotes the variation among the budgeted quantity of production and actual quantity of production achieved arising because of the variation in the number of days worked and budgeted. The formula for computation of this variance is as follows.

Fixed Overheads Calendar Variance = Standard Rate [Budgeted Quantity - Revised Budgeted Quantity]

II] Variable Overhead Variances:

The following variances are calculated in case of variable overheads.

A] Variable Overhead Cost Variance:

This variance denotes the variation among the standard variable overheads for actual overheads and the actual overheads. The variation among the two arises due to the variation among the budgeted and actual quantity. The formula for the computation of this variance is described as follow:

Variable Overhead Cost Variance = Standard Variable Overheads for Actual Production - Actual Variable Overheads.

B] Variable Overheads Expenditure Variance:

 This variance denotes the variation among the standard variable overheads to be charged to the standard production and the actual variable overheads. The variance is favourable, if the actual overheads are less than the standard variable overheads, otherwise it is adverse. The formula for the computation is described as follows:

Variable Overhead Expenditure Variance = Standard Variable Overheads for Standard Production - Actual Variable Overheads.

C] Variable Overheads Efficiency Variance:

It denotes the efficiency through comparing among the output actually acquired and the output that should have been acquired in the actual hours worked. [Standard Production] This variance will be positive if the actual output achieved is more than the standard output. The formula for computation is given below:

Variable Overheads Efficiency Variance: Standard Rate [Standard Quantity - Actual Quantity]

Latest technology based Cost Accounting Online Tutoring Assistance

Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Overhead Variances homework help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Overhead Variances, project ideas and tutorials. We provide email based Overhead Variances homework help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Overhead Variances. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Cost Accounting homework help and assignment help services. They use their experience, as they have solved thousands of the cost accounting assignments, which may help you to solve your complex issues of Overhead Variances. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.