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Thursday, February 17, 2011

Classification Or Types Of Overhead Variances

1. Capacity Or Volume Variance

The overhead volume variance is a deviation of the actual from the budgeted over expenses. Generally, the capacity or volume variance denote the deviation from the budgeted fixed overheads of the fixed overheads applied to the product. It is denoted as a volume variance because it can be calculated for variable as well as fixed overheads into a single rate based on the same activity.

2. Spending Variance

Spending variance is the difference between the actual overheads incurred and the flexible budget overheads for the actual volume. This variance arises due to the deviation of the actual overheads from the flexible budget overheads for the actual volume.

3. Efficiency Variance

The overhead efficiency variance is the difference between the actual and standard hours of an activity.In other words, it is the difference between the actual output and standard output multiplied by the variable overhead rate.