Accounting › Section U · Standard costs and variances › Topic U.4

Overhead variances

Overhead is charged to products at standard rates, so at month end the overhead applied rarely equals the overhead actually incurred. Four variances explain the gap: two for variable overhead and two for fixed.

In this topic

  • Applying overhead at standard
  • Variable overhead spending variance
  • Variable overhead efficiency variance
  • Worked example: Pellworth's March variable overhead
  • Fixed overhead budget variance
  • Fixed overhead volume variance
  • Worked example: Pellworth's March fixed overhead
  • Worked example: a busy month
  • The two-variance view
  • Common mistakes to avoid
  • Key takeaways

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