ECONOMICS

Detailed explanation-1: -The formula for this variance is:(standard hours allowed for production – actual hours taken) × standard overhead absorption rate per hour (fixed or variable).

Detailed explanation-2: -Variable overhead spending variance is the difference between actual variable overhead cost, which is based on the costs of indirect materials involved in manufacturing, and the budgeted costs called the standard variable overhead costs.

Detailed explanation-3: -What Is Variable Overhead Efficiency Variance. Variable overhead efficiency variance refers to the difference between the true time it takes to manufacture a product and the time budgeted for it, as well as the impact of that difference. It arises from variance in productive efficiency.

Detailed explanation-4: -Standard Variable Manufacturing Overhead For example, if variable overhead costs are typically $300 when the company produces 100 units, the standard variable overhead rate is $3 per unit. The accountant then multiplies the rate by expected production for the period to calculate estimated variable overhead expense.