In the three-variance method of factory overhead analysis, _______ variance represents the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked. A. quantity B. efficiency C. spending D. production-volume
Solution
Answer - C. Spending Variance.
Budgeted Factory Overhead based on actual hours worked= Actual hours x Standard Overhead Rate
Actual FactoryOverhead = Actual Hours x Actual Overhead Rate.
Spending Variance = Actual Hours x Standard Rate - Actual Hours x Standard Rate
= Actual Hours ( Standard Rate - Actual Rate)
So, From the Formula it is clear that this variance is occured due to change in rate from actual to standard.
Hence it is the spending varianance.
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SECOND SEMESTER TOPIC COVERAGE SY 2023-2024 Trends, Networks, and Critical Th...
In the three-variance method of factory overhead analysis- _______ var.docx
1. In the three-variance method of factory overhead analysis, _______ variance represents the
difference between actual factory overhead incurred and budgeted factory overhead based on
actual hours worked. A. quantity B. efficiency C. spending D. production-volume
Solution
Answer - C. Spending Variance.
Budgeted Factory Overhead based on actual hours worked= Actual hours x Standard Overhead
Rate
Actual FactoryOverhead = Actual Hours x Actual Overhead Rate.
Spending Variance = Actual Hours x Standard Rate - Actual Hours x Standard Rate
= Actual Hours ( Standard Rate - Actual Rate)
So, From the Formula it is clear that this variance is occured due to change in rate from actual to
standard.
Hence it is the spending varianance.
