Question

The difference between the actual variable overhead cost and the standard variable overhead cost for the actual volume of the overhead activity base is known as the

Select one:

A. variable overhead efficiency variance.

B. fixed overhead budget variance.

C. variable overhead spending variance.

D. fixed overhead volume variance.

Answer 1

First, we shall check on each of the options provided;

A. Variable Overhead Efficiency Variance

The variable overhead efficiency variance is the difference between the actual and budgeted hours worked, which are then applied to the standard variable overhead rate per hour.

B. Fixed Overhead Budget Variance

The fixed overhead spending variance is the difference between the actual fixed overhead expense incurred and the budgeted fixed overhead expense.

C. Variable Overhead Spending Variance

  The variable overhead spending variance is the difference between the actual and budgeted rates of spending on variable overhead. The variance is used to focus attention on those overhead costs that vary from expectations.

D. Fixed Overhead Volume Variance

The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods. This variance is reviewed as part of the period-end cost accounting reporting package.

ANSWER:

The answer is option C : Variable Overhead Spending Variance.

It is the difference between the amount of variable overhead that has been actually incurred & the variable overhead which should have been incurred for the actual hours that has been worked is known as the variable overhead expenditure variance.
The formula is:
Actual variable overhead – Standard variable overhead