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

Exercise 34

Three-Variance and Four-Variance Analysis of Factory Overhead (Continuation of Exercises 15-31 and 15-32) The Platter Valley factory of Bybee Industries uses a three-variance analysis of the total factory overhead variance.

Required

1. Use the data given in Exercises 15-31 and 15-32 to compute the total overhead spending variance, the efficiency variance, and the production-volume variance.

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2. Use your answers for Requirement 1 of Exercises 15-31 and 15-32 to determine the spending variances (both variable and fixed), the efficiency variance, and the production-volume variance.

Step 1 of 6

Variable overhead variance is the difference between overhead budgeted and actual overhead at the end. Variable overhead variance includes following variances.

1. Variable flexible-budget variance

2. Variable overhead spending variance

3. Variable overhead efficiency variance