Scribd
Upload
2 views

Overhead Variance Presentation (1)

Uploaded by

tarunikasai2005
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
2 views

Overhead Variance Presentation (1)

Uploaded by

tarunikasai2005
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 10

Overhead Variance

Understanding Overhead Costs and


Variances in Cost Accounting
Introduction
• • Definition of Overhead: Costs that cannot be
directly attributed to a specific product or
service.
• • Importance: Essential for cost control and
decision-making.
• • Types of Overheads: Fixed and Variable
Components of Overhead Variance
• Variable Overhead Variance:
• - Spending Variance
• - Efficiency Variance

• Fixed Overhead Variance:


• - Budget Variance
• - Volume Variance
• - Capacity & Efficiency Variance
Formulae for Overhead Variances
• • Variable Overhead Spending Variance:
• Actual Variable Overheads - (Actual Hours
Worked × Standard Rate)

• • Variable Overhead Efficiency Variance:


• (Standard Hours - Actual Hours) × Standard
Rate

• • Fixed Overhead Volume Variance:


Causes of Overhead Variances
• • Production volume changes
• • Resource inefficiencies
• • Budget vs. actual cost differences
• • External factors (e.g., inflation)
Interpretation and Analysis
• • Favorable Variance: Indicates cost efficiency.
• • Unfavorable Variance: Highlights
inefficiencies or cost overruns.
• • Timely identification helps in corrective
actions.
Example Calculation
• Given Data:
• - Budgeted Fixed Overhead: ₹10,000
• - Actual Overhead: ₹9,500
• - Budgeted Hours: 1,000
• - Actual Hours: 950

• Step-by-Step Calculation: (Show workings)


Impact on Decision Making
• • Facilitates cost control.
• • Identifies inefficiencies.
• • Supports pricing and budgeting decisions.
Conclusion
• • Overhead variances are critical for cost
management.
• • Monitoring variances ensures better
financial control.
• • Encourage regular variance analysis for
improvement.
Q&A
• Any questions?
• Thank you for your attention!

You might also like