Question

Which of the following is used to calculate total variable overhead variance where VOH = Variable Overhead, SVOR = Standard Variable Overhead Rate, SH = Standard Hour Allowed, and AH = Actual Direct Labor Hours Used?

a.Total VOH Variance = Variable VOH – SVOR × AH
b.Total VOH Variance = Fixed VOH – SVOR × AH
c.Total VOH Variance = Standard VOH – SVOR × SH
d.Total VOH Variance = Actual VOH – SVOR × SH
e.None of these choices are correct.

Answer 1

Answer:

See below.

Explanation:

Total Variable over head variance = Spending variance + Efficiency variance

Total Spending variance = VOH - SVOR × AH

Total Efficiency variance = SVOR * ( AH - SH)

Assuming we only want total spending variance then option A is correct, however if we assume total overhead variance is required option E would be correct as we also need to account for the efficiency variance of overhead as per the difference between actual and standard hours worked.

Hope that helps.