Question

Which of the following variances is not determined during an overhead variance analysis?

1) Volume variance.
2) Budget variance.
3) Spending variance.
4) Price variance.

Answer 1

In overhead variance analysis, price variance is not typically determined; instead, volume variance, budget variance, and spending variance are examined.

Step-by-step explanation:

Price variance is not typically determined during an overhead variance analysis. This type of analysis usually includes the examination of three variances: volume variance, which relates to the difference between the budgeted and actual volume of production; budget variance, which is the difference between the budgeted fixed overhead and the actual fixed overhead; and spending variance, which details the difference between actual variable overhead and budgeted variable overhead based on the actual volume of production. Price variance is more commonly associated with direct materials and direct labor rather than overhead costs.

In an overhead variance analysis, the volume variance is not determined. The other variances - budget variance, spending variance, and price variance - are calculated and analyzed. The volume variance refers to the difference between the actual level of activity and the budgeted level of activity. It is not a component considered in the overhead variance analysis.