Question

The total variable overhead variance can be expressed as:

A. the sum of the spending and efficiency variances.
B. the underapplied variable overhead and the spending variance.
C. the spending, efficiency, and volume variances.
D. the efficiency variance and the overapplied variable overhead.
E. None of these.

Answer 1

sum of the spending and efficiency variances.

Explanation:

Variable overhead refers to the manufacturing costs that vary with changes in output of production.

The total variable overhead variance refers to the difference between the actual and budgeted rates of spending on variable overhead.

This concept is used to determine the lowest possible price at which a product can be sold.

As production output increases or decreases, variable overhead also varies. Variable overhead includes wages for handling, shipping of the product or utilities for the equipment.

The total variable overhead variance can be expressed as sum of the spending and efficiency variances.