COST ACCOUNTING
FLEXIBLE BUDGETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The overhead spending variance:
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measures the variance in amount spent for fixed overhead items.
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includes elements of waste or excessive usage as well as elements of price variance.
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is generally considered to be the least useful of all overhead variances.
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measures the difference between denominator activity and standard hours allowed
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Explanation:
Detailed explanation-1: -Variable Overhead Spending Variance is the difference between what the variable production overheads actually cost and what they should have cost given the level of activity during a period. The standard variable overhead rate is typically expressed in terms of machine hours or labor hours.
Detailed explanation-2: -The spending variance for direct materials is known as the purchase price variance, and is the actual price per unit minus the standard price per unit, multiplied by the number of units purchased.
Detailed explanation-3: -Key Takeaways Examples of variable overhead include production supplies, energy costs to run production lines, and wages for those handling and shipping the product.
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