OH static budget varience= Actual OH results – OH static budget amount

VOH static budget varience= Actual VOH results – VOH static budget amount

FOH static budget varience= Actual FOH results – FOH static budget amount

OH sales volume varience= OH flexible budget amount – OH static budget amount

VOH sales volume varience= VOH flexible budget amount – VOH static budget amount

FOH sales volume varience (Always zero) = FOH flexible budget amount – FOH static budget

s
amount

ai
OH flexible budget varience= Actual OH – OH flexible budget amount

Ed
VOH flexible budget varience= Actual VOH – VOH flexible budget amount

FOH flexible budget varience= Actual FOH – FOH flexible budget amount
em
OH flexible budget varience= OH spending variance + OH efficiency varience

VOH flexible budget varience= VOH spending variance + VOH efficiency varience

FOH flexible budget varience= FOH spending variance + FOH efficiency varience (zero)
he

So,

FOH flexible budget varience= FOH sales variance

lra

There’s no efficiency varience for fixed overhead costs, because a given lump sum of fixed
overhead costs will be unaffected by how efficiently machine hours are used to produce output
in a given budget period.
da

Total OH variance= OH flexible budget varience + OH production volume varience

Total VOH variance= VOH flexible budget varience + VOH production volume varience(zero)
Ab

So,

Total VOH variance= VOH flexible budget varience

‫ النه بستخدم اشي متغير مثل االيدي العاملة مش اشي ثابت كاالالت‬،‫بعني اذا انتجت بكون تكبدت واذا ما انتجت بكون ما تكبدت‬.

Total FOH variance= FOH flexible budget varience + FOH production volume varience
Variable:

1) spending variance= (actual rate – budgeted rate) * actual quantity of allocation base used.

Actual rate= (actual variable overhead / (actual allocation base)).

Budgeted rate= (budgeted variable overhead/ (budgeted allocation base)).

Actual allocation base= (actual output * actual quantity).

budgeted allocation base= (budgeted output * budgeted quantity).

2) Efficiency variance= (actual quantity used for actual output – budgeted quantity allowed for

s
actual output) * budgeted rate.

ai
actual quantity used for actual output= actual allocation base.

budgeted quantity allowed for actual output= actual output * budgeted quantity.

Ed
3) production variance= zero

4) flexible budget variance= spending variance + efficiency variance.

flexible budget variance= actual result – flexible budget amount.

em
Flexible budget amount= allocated.

Flexible budget amount= (actual output * budgeted quantity * budgeted rate).

5)total variable overhead variance= flexible budget variance.

he

6) Variable manufacturing overhead planning day to day.

lra

Fixed:

1) spending variance= (actual result – flexible amount).

da

spending variance= flexible budget variance.

2) Efficiency variance= zero.

3) production variance= flexible budget amount – fixed overhead allocated for actual output
Ab

units produced.

flexible budget amount= (budgeted output * budgeted quantity * budgeted rate).

flexible budget amount= static budget amount.

fixed overhead allocated for actual output units produced= budgeted quantity allowed for actual
output * budgeted rate.

4) fixed overhead planning at the beginning of the period.

Comprehensive Question:

The company have the following information:

Budgeted VOH in 2023 1,728,000

Budgeted FOH in 2023 3,312,000
Budgeted output units in 2023 144,000
Budgeted machine hours per output 0.40
actual VOH in April 2023 130,500
actual FOH in April 2023 285,000
Actual output units in April 2023 10,000

s
Actual machine hours per output 0.45
Cost allocation base is (machine hours).

ai
Compute all of the following:

Ed
1) Total overhead variance
2) Variable overhead variance
3) Variable overhead spending variance
4) Variable overhead efficiency variance
5) variable overhead production volume variance
em
6) Variable overhead flexible budget variance
7) Fixed overhead variance
8) fixed overhead spending variance
9) fixed overhead efficiency variance
10) fixed overhead flexible budget variance
he

11) fixed overhead production volume variance

lra

Answer:

1) total overhead variance= actual OH – allocated OH

actual OH= VOH + FOH

da

actual OH= (130,500 + 285,000) = 415,500

allocated OH= (actual output * budgeted quantity * budgeted OH rate)

Ab

budgeted OH rate= (budgeted VOH + budgeted FOH)/budgeted allocation base))

budgeted allocation base= budgeted output *budgeted quantity

budgeted OH rate= (1,728,000 + 3,312,000)/ (144,000 * 0.40) = 87.5 per machine hour

allocated OH= (10,000 * 0.40 * 87.5) = 350,000

total overhead variance= 415,500 - 350,000= 65,500U

2) Variable overhead variance= actual VOH – allocated VOH

allocated VOH= (actual output * budgeted quantity * budgeted VOH rate)

budgeted VOH rate= (budgeted VOH)/budgeted allocation base)

budgeted VOH rate= (1,728,000/ (0.40 * 144,000)) = 30 per machine hour.

allocated VOH= (10,000 * 0.40 * 30) = 120,000

Variable overhead variance= 130,500 - 120,000= 10,500 U

Additional question on (2):

What is the budgeted fixed overhead?

s
Budgeted OH rate= budgeted variable overhead rate + budgeted fixed overhead rate

ai
87.5= 30 +?

Ed
budgeted fixed overhead rate= 57.5

Additional question on (2):

What is the fixed overhead variance?

em
Total overhead variance= variable overhead variance + fixed overhead variance

65,500 U= 10,500 U +?

fixed overhead variance= 55,000U

he

Additional question on (2):

What is the budgeted overhead per output?

‫نفس االشي بس بنقسم على الي انتجناه فقط النه بدو الريت للحبه المنتجة الواحدة‬.
lra

budgeted OH rate= (1,728,000 + 3,312,000)/ 144,000 = 35 per machine hour

or
da

87.5 * 0.40= 35 per machine hour

Additional question on (2):

What is the budgeted variable overhead per output?

Ab

budgeted VOH rate= 1,728,000/ 144,000= 12 per machine hour

or

30 * 0.40= 12 per machine hour

3) Variable overhead spending variance= (actual rate – budgeted rate) * actual quantity of
allocation base used.

actual VOH rate= actual VOH / actual allocation base

actual allocation base= (actual output * actual quantity)

actual VOH rate= 130,500/ (10,000 * 0.45) = 29 per machine hour.

budgeted VOH rate= (1,728,000/ (0.40 * 144,000)) = 30 per machine hour.

actual quantity of allocation base used= actual output * actual quantity

s
actual quantity of allocation base used= 10000 * 0.45= 4,500

ai
Variable overhead spending variance= (29 – 30) * 4,500= 4,500 F

Ed
4) Variable overhead efficiency variance= (actual quantity used for actual output – budgeted
quantity allowed for actual output) * budgeted rate.

actual quantity used for actual output =

em 4,500 ‫هو نفس ال (اكتشول الوكيشن بيس) الي طلعناه فوق‬

budgeted quantity allowed for actual output= (actual output * budgeted quantity)

budgeted quantity allowed for actual output= (10,000 * 0.40) = 4,000

he

budgeted rate= 30

Variable overhead efficiency variance= (4,500 -4,00) * 30= 15,000 U

lra

5) variable overhead production volume variance= zero

da

6) Variable overhead flexible budget variance= actual result – flexible budget amount

flexible budget amount= (actual output * budgeted quantity * budgeted rate).

Ab

flexible budget amount= (10,000 * 0.40 * 30) = 120,000

‫نالحظ انها نفس ال (الوكيتد) عشان هيك كان عنا قانون بقول‬:

flexible budget amount= allocated

Variable overhead flexible budget variance= 130,500 – 120,000 = 10,500 U

‫نالحظ انه طلع الجواب نفس جواب ال (فاريابل اوفر هيد فارينس ) النه عنا قانون بقول‬:

total variable overhead variance= flexible budget variance.

Because the production volume variance is zero.

Additional question on (6):

Variable overhead flexible budget variance?

Variable overhead flexible budget variance= spending variance + efficiency variance

Variable overhead flexible budget variance= 4,500 F + 15,000 U

Variable overhead flexible budget variance= 10,500U

Additional question on (6):

s
Variable overhead flexible budget variance =Variable overhead spending variance + Variable

ai
overhead efficiency variance

10,500U= 4,500 F +?

Ed
Variable overhead efficiency variance= 15,000 U

7) Fixed overhead variance= Actual FOH – Allocated FOH

em
Allocated FOH= (budgeted quantity * actual output * budgeted rate)

Budgeted rate= (FOH / Budgeted allocation base)

Budgeted allocation base= budgeted quantity * budgeted output

he

Budgeted allocation base= 0.4 * 144,000= 57,600

Budgeted rate= (3,312,000 / 57,600)= 57.5 per machine hour

lra

Allocated FOH= (0.4 * 10,000 * 57.5)= 230,000

Fixed overhead variance= 285,000 – 230,000= 55,000 U

da

8) fixed overhead spending variance= (actual result – flexible amount)

Flexible budget amount= (budgeted quantity * budgeted output * budgeted rate)

Ab

The budgeted output for a year, I need only for april so, ÷12)

144,000/12= 12,000

Flexible budget amount= (0.4 * 12,000 * 57.5)= 276,000

Fixed overhead spending variance= (285,000 – 276,000)= 9,000 U

9) fixed overhead efficiency variance= zero

10) fixed overhead flexible budget variance= (actual result – flexible amount)

Fixed overhead spending variance= (285,000 – 276,000)= 9,000 U

‫او عنا قانون بقول‬:

fixed overhead flexible budget variance =Fixed overhead spending variance

11) fixed overhead production volume variance= flexible budget amount – fixed overhead
allocated for actual output units produced.

s
Fixed overhead allocated for actual output units produced= budgeted quantity allowed for actual

ai
output * budgeted rate.

Fixed overhead allocated for actual output units produced= (10,000 * 0.4) * 57.5= 230,000

Ed
fixed overhead production volume variance= 276,000 - 230,000= 46,000 U

em
he
lra
da
Ab