# 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:

## 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:

1. Controllable variance
2. Volume variance

The three variance method:

1. Spending variance
2. Idle capacity variance
3. Efficiency variance

The four variance method:

1. Spending variance
2. Variable efficiency variance
3. Fixed efficiency variance
4. Idle capacity variance