Overall or Net Factory Overhead Variance
Overall or Net Factory Overhead Variance:
Definition:
Overall or net factory overhead variance is the difference between actually incurred factory overhead and expenses charged into process using the standard factory overhead rate.
Formula of Overall or Net Factory Overhead Variance:
Overall or net overhead variance is calculated by the following formula:
[Actual overhead – Overhead charged to production]
Example:
At the end of a month the data for a department are as follows:
Actual overhead | $7,384 |
Units produced | 850 units |
Actual hours used | 3,475 hours |
Standard hours allowed her unit of product | 4.00 hours |
Calculate net factory overhead variance. |
|
Calculation |
|
Actual departmental overhead | $7,384 |
Overhead charged to production: 3,400 standard hours allowed × $2 standard overhead rate | 6,800 |
———- | |
Overall or net overhead variance | $584 unfav. |
====== |
This unfavorable overall overhead variance needs further analysis to reveal detailed causes for the variance and to guide management toward remedial action. This analysis is made by using:
The two variance method:
- Controllable variance
- Volume variance
The three variance method:
- Spending variance
- Idle capacity variance
- Efficiency variance
The four variance method:
- Spending variance
- Variable efficiency variance
- Fixed efficiency variance
- Idle capacity variance
You may also be interested in other articles from “standard costing and variance analysis” chapter
- Standard Costs and Management By Exception
- Setting Standard Costs – Ideal Versus Practical Standards
- Direct Materials Price and Quantity Standards
- Direct Materials Price Variance
- Direct Materials Quantity Variance
- Direct Labor Rate and Efficiency Standards
- Direct Labor Rate/Price Variance
- Direct Labor Efficiency | Usage | Quantity Variance
- Manufacturing Overhead Standards
- Overall or net factory overhead variance.
- Controllable variance
- Volume variance
- Spending variance
- Idle capacity variance
- Efficiency variance
- Spending variance
- Variable efficiency variance
- Fixed efficiency variance
- Idle capacity variance
- Mix and Yield Variance – Definition and Explanation
- Materials Mix and Yield Variance
- Labor Yield Variance
- Factory Overhead Yield variance
- Variance Analysis and Management By Exception
- Managerial importance and usefulness of variance analysis
- Advantages and Disadvantages of Standard Costing System
- Standard Costing Discussion Questions and Answers
- Standard Costing and Variance Analysis Formulas
- Standard Costing and Variance Analysis Problems and Solution
- Standard Costing and Variance Analysis Case Study
Other Related Accounting Articles:
- Factory Overhead Idle Capacity Variance
- Factory Overhead Efficiency Variance
- Fixed Overhead Efficiency Variance
- Standard Costing and Variance Analysis Formulas
- Factory Overhead Spending Variance
- Factory Overhead Yield Variance
- Variable Overhead Efficiency Variance
- Factory Overhead Volume Variance
- Direct Labor Yield Variance
- Factory Overhead Controllable Variance
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