Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 4

What are the relationships among the total overhead spending variance, the variable overhead spending variance, the fixed factory overhead budget variance, and the variable overhead efficiency variance?

Step 1 of 3

Total Overhead Spending Variance is the difference between actual overhead expenses incurred and the budgeted actual hours worked.

If actual expenses incurred are more than budgeted allowance on the basis of actual hours worked, the resultant variance is unfavorable spending variance.

If reverse is the situation, where actual expenses are less than budgeted, the resultant variance is favorable variance.