Concept explainers
Concept introduction:
Variable overhead rate variances:
It is a measure to determine the impact of the difference between standard variable overhead rate,i.e., the rate that should be paid and actual variable overhead rate,i.e., the rate which is actually paid for actual hours on the standard variable overhead.
Variable overhead efficiency variances:
It isa measure to determine the impact of the difference between standard number of hours worked and actual hours worked on the standard variable overhead.
Variable overhead spending variances:
It is the combined value of the variable overhead rate variance and variable overhead efficiency variance.
Actual variable overhead:
It is the overhead which is actually incurred and is calculated by multiplying actual hourwith actual rate.
Applied variable overhead:
It is the overhead which should be incurred and is calculated by multiplying standard hour with standard rate.
To compute:
The variable overhead rate and efficiency variances and its over or under applied variable overhead.
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