Question

Which of the following variances would be useful to help control overhead spending?

1) Variable-Overhead Spending Variance, Fixed-Overhead Budget Variance, Fixed-Overhead Volume Variance
2) Yes Yes Yes
3) Yes Yes No
4) Yes No No
5) Yes No Yes
6) No Yes No

Answer 1

Among the provided options, the 5) variances useful to help control overhead spending are: Variable-Overhead Spending Variance (Yes), Fixed-Overhead Budget Variance (No), and Fixed-Overhead Volume Variance (Yes).

Step-by-step explanation:

To effectively control overhead spending, it is crucial to assess specific variances related to variable and fixed overhead costs. The Variable-Overhead Spending Variance is instrumental in this regard as it measures the difference between the actual variable overhead cost incurred and the standard variable overhead cost based on the actual activity level. A favorable variance suggests efficient spending on variable overhead.

However, the Fixed-Overhead Budget Variance does not directly contribute to controlling overhead spending as it represents the difference between the actual fixed overhead cost and the budgeted fixed overhead cost. While it provides an overall measure of fixed overhead cost control, it does not specifically address spending efficiency.

On the other hand, the Fixed-Overhead Volume Variance is not directly relevant to spending control; it is associated with production volume changes and may not provide insights into spending efficiency.

Therefore, the variances useful for controlling overhead spending, based on the given options, are the Variable-Overhead Spending Variance (Yes) and Fixed-Overhead Volume Variance (Yes).

Correct Option: 5) Yes No Yes