The difference between actual overhead costs incurred and the budgeted overhead costs based on a flexible budget is the controllable variance.
In accounting, there are two elements of a variance- rate variance and volume variance. While the rate variance refers to the difference in the actual price paid vs. the budgeted price, the volume variance refers to the portion of the variance in sales, unit usage.
- The controllable variance is in the "rate" element of the variance.
- Controllable variance refers to the process by which the efficiency of using variable overhead resources is measured.
- This means that the controllable variance is the difference between the actual cost and the budgeted overhead cost.
- The calculation for this variance is: Actual overhear expense - (budgeted overhead cost x standard number of units)= overhead controllable variance.
In short, we can say that the controllable variance is the amount that is not part of the volume variance. Rather, it is the difference in the overhead cost incurred and the budgeted overhead cost.
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