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. 
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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