ECONOMICS

Detailed explanation-1: -Reporting Overhead Variance First, transfer the overhead variance to the Cost of Goods sold account. Do this when the overhead variance is comparatively insignificant. The second alternative is to prorate the overhead variance to an inventory account, such as Work in Progress, Finished Goods, or Cost of Goods Sold.

Detailed explanation-2: -The balances in the variance accounts are usually closed to the cost of goods sold account, particularly when the amounts are small. Alternatively, the balances in the variance accounts may be allocated to the appropriate inventory accounts and the cost of goods sold account.

Detailed explanation-3: -A budget variance is an accounting term that describes instances where actual costs are either higher or lower than the standard or projected costs. An unfavorable, or negative, budget variance is indicative of a budget shortfall, which may occur because revenues miss or costs come in higher than anticipated.

Detailed explanation-4: -The main two types of sales variance are: Sales price variance: when sales are made at a price higher or lower than expected. Sales volume variance: a difference between the expected volume of sales and the planned volume of sales.