Anda di halaman 1dari 31

STANDARD COST: VARIABLE

MANUFACTURING
OVERHEAD VARIANCE
ONE WAY, TWO WAY, THREE WAY AND FOUR WAY VARIANCES
Group 7
Leony Lyn Briones
Christian Gracia
Marven Paolo Pasinos
Lois Marwie Tolentino

FACTORY OVERHEAD VARIANCES


Factory Overhead Variances may be determined using the one way,
two way, three way and four way variances.
Whatever method we use the amount of total factory
overhead variance will be the same.
Requires more detail than the variance analysis for direct materials
and direct labor

ONE- WAY
VARIANCE APPROACH
The one factor analysis is limited in its
usefulness

ONE-WAY VARIANCE
Applied Overhead
(Standard Price or
Combined Rate x
Standard Quantity)

ACTUAL OVERHEAD
(Variable Overhead +
Fixed Overhead)

TOTAL OVERHEAD
VARIANCE

TWO- WAY
VARIANCE APPROACH

TWO-WAY VARIANCE APPROACH


-PROVIDES INFORMATION ON A BUDGET AND A
VOLUME VARIANCE.
THE BUDGET VARIANCE IS THE DIFFERENCE BETWEEN
ACTUAL OVERHEAD BUDGETED OVERHEAD AT
STANDARD QUANTITY ALLOWED FOR ACTUAL OUTPUT.

TWO-WAY VARIANCE APPROACH: BUDGET


VARIANCE
BUDGET VARIANCE = ACTUAL OVERHEAD BUDGETED
OVERHEAD ( at standard quantity allowed for actual output)
THIS VARIANCE IS ALSO CALLED CONTROLLABLE
VARIANCE BECAUSE DEPARTMENT MANAGER HAS
CONTROL IN THE INCURRENCE OF COSTS OVER A
PERIOD OF TIME.

TWO-WAY VARIANCE APPROACH:


VOLUME/NON-CONTROLLABLE VARIANCE
THE VOLUME VARIANCE IS THE DIFFERENCE
BETWEEN THE BUDGETED OVERHEAD AT
STANDARD QUANTITY ALLOWED FOR ACTUAL
OUTPUT AND APPLIED OVERHEAD.
PRODUCING QUALITIES DIFFERENT FROM LEVEL
USED IN DETERMINING THE OVERHEAD RATE
CAUSES THE VOLUME VARIANCE.

TWO-WAY VARIANCE APPROACH:


VOLUME/NON-CONTROLLABLE VARIANCE
VOLUME VARIANCE = BUDGETED OVERHEAD (at standard
quantity allowed for actual output) APPLIED OVERHEAD
THIS VARIANCE IS ALSO CALLED NON-CONTROLLABLE
VARIANCE BECAUSE THE DEPARTMENT MANAGER HAS NO
INFLUENCE OR CONTROL OVER THE UTILIZATION OF
CAPACITY.

Illustration:
The standard required to produce a unit of product for Carribean
Manufacturing Company is as follows:
Variable overhead, 2 machine hours @ P40
Fixed overhead, 2 machine hours @ P160
Budgeted fixed factory overhead
Budgeted volume of production
Actual machine hours
Actual variable factory overhead
Actual fixed factory ovehead
Actual unit produced

P320,000
1,000
1,890
P90,000
P310,000
900

EXAMPLE
APPLIED FACTORY
OVERHEAD

BUDGET OVERHEAD(at
std. qty. allowed)

APPLIED FACTORY
OVERHEAD

VARIABLE OH- 90, oooo

VARIABLE( 1,800*40)
72,000

SH x FACTORY OH RATE

900 x 2 x 200
FIXED OH -

310,000

4oo,000
CONTROLLABLE VARIANCE
=

FIXED OH
TOTAL

= 360,000

320,000
392,000

VOLUME VARIANCE
+
=
32,000

8,000

TOTAL OVERHEAD
VARIANCE

360,000

40,000

TWO-WAY VARIANCE APPROACH


Fixed Overhead

ACTUAL FACTORY
OVERHEAD

BUDGETED
OVERHEAD BASED
ON STANDARD
HOURS ALLOWED

Budget or Controllable
Variance

Applied FOH
(SVOR + SFOR) x
SH

Volume or NonControllable Variance

TOTAL FIXED
OVERHEAD
VARIANCE

THREE- WAY
VARIANCE APPROACH

THREE- WAY VARIANCE APPROACH


Provdes information on spending, efficiency and volume variance
SPENDING VARIANCE= TAOH [(VOH RATE x AQ) + BFOH]
EFFICIENCY VARIANCE= [(VOH RATE x AQ) + BFOH] [(VOH RATE x
SQ)
+ BFOH]
VOLUME VARIANCE= [(VOH RATE x SQ) + BFOH] [(VOH RATE + FOH
RATE x SQ]
TAOH- total actual overhead
VOH- variable overhead
BFOH- budgeted fixed overhead (remains at constant amount
regardless of activity level as long as within the relevant range)

THREEWAY VARIANCE APPROACH


BUDGETED
ACTUAL FACTORY
OVERHEAD
VOH + FOH

OVERHEAD (Base on
Actual
Input
Measure)
FIXED
OVERHEAD
BUDGET
+
(VOH
RATE
x
ACTUAL
LEVEL OF ACTIVITY/
QUANTITY)

OVERHEAD
SPENDING
VARIANCE

BUDGETED OVERHEAD
(Base on Standard
output Measure)
FIXED OVERHEAD
BUDGET + (VOH RATE
x ACTUAL LEVEL OF
Activity/ Quantity)

OVERHEAD
EFFICIENCY
VARIANCE
BUDGET
VARIANCE

APPLIED OVERHEAD
(FIXED OVERHEAD
RATE + VARIABLE
OVERHEAD RATE) x
STANDARD
QUANTITY FOR
ACTUAL OUTPUT

VOLUME
VARIANCE
VOLUME
VARIANCE

TOTAL OVERHEAD
VARIANCE

Variable Overhead Rate (Standard)

$12.00

Actual Variable Overhead Costs


Actual Hours Worked
Quarts of Deluxe Strawberry Frozen Yogurt
Produced
Hours Allowed for Actual Production
Applied Variable Overhead

per direct labor hour

$16,120
1,300
120,000
1,200
$14,400

Budgeted/planned items for May:


Budgeted Fixed Overhead

$40,000

Expected Production in Quarts of Frozen Yogurt


Expected Activity in Direct Labor Hours (0.01 x 100,000)

100,000
1,000 direct labor hours
per direct labor
$40
hour

Standard Fixed Overhead Rate ($40,000/1,000)


Actual Results for May:
Actual Production of Yogurt in Quarts
Actual Fixed Overhead Cost
Standard Hours Allowed for Actual Production (0.01 x
1200,00)
Actual Variable Overhead
Actual Fixed Overhead

120,000
$40,500
1,200
16,120
40,500

quarts

direct labor hours

THREE- WAY VARIANCE APPROACH


ACTUAL FACTORY
OVERHEAD
VOH + FOH

=40,500 + 16,120
= 56,620

[(VOH RATE x AQ) +


BFOH]
=40,000 + (12 x
1,300)
= 55,600

OVERHEAD
EFFICIENCY
VARIANCE

OVERHEAD
SPENDING
VARIANCE

1,020

[(VOH RATE x SQ) +


BFOH]
= 40,000 + (12 x
1,200)
=54,400

VOLUME
VARIANCE

(8,000)

1,200
BUDGET
VARIANCE

2,200

Applied Overhead
[(VOH RATE + FOH
RATE x SQ]
= (12 + 40) x 1,200
=62,400

VOLUME
VARIANCE

(8,000)

TOTAL OVERHEAD VARIANCE

(5780)

VARIABLE MANUFACTURING OVERHEAD


-

Total variance manufacturing overhead variance is the difference


between actual variable overhead and standard variable overhead
allowed on actual output.

This may be broken down into:


a) Variable overhead spending variance
b) Variable overhead efficiency variance

The

possible causes of variable overhead


price/controllable variance are as follows:

spending

variance

or

1.

Actual costs, e.g. machine power, materials handling, supplies were


different from those expected because of fluctuations in market prices or
rates

2.

Increase in energy costs

3.

Waste in using supplies

4.

Avoidable machine breakdowns

5.

Wrong grade of indirect material and indirect labor

6.

Lack of operators or tools

The possible causes of variable overhead efficiency variances are


as follows:
This is attributable to efficiency in using the base on which variable
overhead is applied. So that if the basis of the variable overhead
application is direct labor hours, the causes of the labor efficiency
variance will also be the causes of the variable overhead efficiency
variance.

FIXED MANUFACTURING OVERHEAD VARIANCE ANALYSIS


- In variance analysis, fixed manufacturing
differently from variable manufacturing costs.

costs

are

treated

- It is usually assumed that fixed costs are unchanged when volume


changes, so the amount budgeted for fixed overhead is the same in
both the master and flexible budgets.
- This is consistent with the variable costing method of product
costing.
- There are no input-output-relationships for fixed overhead.
- The difference between the actual fixed overhead and the budgeted
fixed overhead at normal capacity falls under the category of a price
variance (also called spending or budget variance)
- The difference between the budgeted fixed overhead and applied
fixed overhead represents the volume or capacity variance

The possible causes of capacity or volume variance are as


follows:
1.

Poor production scheduling

2.

Unusual machine breakdowns

3.

Storms or strikes

4.

Fluctuations over time

5.

Decrease in customer demand

6.

Excess plant capacity

7.

Shortage of skilled workers

FOUR-WAY VARIANCE APPROACH


Variable Overhead

ACTUAL VARIABLE
OVERHEAD

ACTUAL QUANTITY x
VARIABLE
OVERHEAD RATE

Variable Overhead
Spending Variance

This variance reflects the


price differences in paying
higher or lower than
standard prices set by the
company

STANDARD
QUANTITY x
VARIABLE
OVERHEAD RATE
(Applied VOH)

Variable Overhead
Efficiency Variance

TOTAL VARIABLE
OVERHEAD
VARIANCE

Using more or less input


than the standard set by
the company causes this
variance

VARIABLE OVERHEAD
VARIABLE OVERHEAD SPENDING VARIANCE
= (AVOR x AH) (SVOR x AH)
= (AVOR SVOR)AH
AVOR- Actual Variable Overhead Rate
SVOR- Standard Variable Overhead Rate
AH- Actual Hours

VARIABLE OVERHEAD
VARIABLE OVERHEAD EFFICIENCY VARIANCE
= (SVOR x AH) (SVOR x SH)
= (AH SH) SVOR
AVOR- Actual Variable Overhead Rate
SVOR- Standard Variable Overhead Rate
AH- Actual Hours

FOUR-WAY VARIANCE APPROACH


Fixed Overhead

ACTUAL VARIABLE
OVERHEAD

BUDGETED FIXED
OVERHEAD

Fixed Overhead
Spending Variance

STANDARD
QUANTITY x FIXED
OVERHEAD RATE
(Applied FOH)

Fixed Overhead
Volume Variance
TOTAL FIXED
OVERHEAD
VARIANCE

FIXED OVERHEAD
FIXED OVERHEAD SPENDING VARIANCE
= ACTUAL FIXED OVERHEAD - BUDGETED FIXED
OVERHEAD

FIXED OVERHEAD
FIXED OVERHEAD VOLUME VARIANCE
=BUDGETED FIXED OVERHEAD - APPLIED FIXED
OVERHEAD
=BUDGETED FIXED OVERHEAD - (SFOR x SH)
*SFOR- Standard Fixed Overhead Rate
*SH- Standard Hour

FOUR VARIANCE METHOD/


OVERHEAD
COST
VARIANCE
TWO VARIANCES FOR
VARIABLE OVERHEAD

TWO VARIANCES FOR


FIXED OVERHEAD

TOTAL VARIABLE
OVERHEAD VARIANCE

TOTAL FIXED
OVERHEAD VARIANCE

VARIABLE OVERHEAD
SPENDING VARIANCE

VARIABLE OVERHEAD
EFFICIENCY
VARIANCE

FIXED OVERHEAD
SPENDING VARIANCE

FIXED OVERHEAD
VOLUME VARIANCE

Illustration:
The standard required to produce a unit of product for Carribean
Manufacturing Company is as follows:
Variable overhead, 2 machine hours @ P40
Fixed overhead, 2 machine hours @ P160
Budgeted fixed factory overhead
Budgeted volume of production
Actual machine hours
Actual variable factory overhead
Actual fixed factory ovehead
Actual unit produced

P320,000
1,000
1,890
P90,000
P310,000
900

Variable Overhead
(1)

(2)

(3)

Actual variable
overhead

AH x Std. Variable OH
rate

Applied Variable OH
(SH x Std. variable
OH rate)

90,000

(1890x40) = 75,600

(1,800 x 40) =
72,000

Variable Overhead
Spending Variance

Variable Overhead
Efficiency Variance

P14,400 UF

P3,600 UF

Fixed Overhead
(1)

(2)

(3)

Actual fixed overhead

Budgeted Fixed
Overhead

Applied fixed OH

P310,000

P320,000

(900 x 2 x 60) =
P288,000

Variable Overhead
Spending Variance

Variable Overhead
Efficiency Variance

(P10,000) F

P32, 000 UF

Anda mungkin juga menyukai