What does the variable overhead efficiency variance tell management?

Variable overhead efficiency variance refers to the difference between the true time it takes to manufacture a product and the time budgeted for it, as well as the impact of that difference.

What does the variable overhead efficiency variance tell management quizlet?

A variable manufacturing overhead efficiency variance indicates whether more or less of the chosen allocation base was used than was budgeted for the actual output achieved.

What does a favorable variable overhead efficiency usage quantity variance mean?

= Variable overhead efficiency variance. A favorable variance means that the actual hours worked were less than the budgeted hours, resulting in the application of the standard overhead rate across fewer hours, resulting in less expense being incurred.

Why is variable overhead rate variance Favourable?

Variable overhead spending variance is favorable if the actual costs of indirect materials are lower than the standard or budgeted variable overheads. Variable overhead spending variance is unfavorable if the actual costs are higher than the budgeted costs.

When variable overhead efficiency is favorable?

A favorable variable overhead efficiency variance may occur due to one or more of the following reasons: Replacement of less efficient machine with a more efficient one which is capable of reducing the time required to manufacture a unit of product. Employment of highly skilled, more efficient and motivated workers.

What is variance indicate its significance to management accountant?

Definition: Variance analysis is the study of deviations of actual behaviour versus forecasted or planned behaviour in budgeting or management accounting. This is essentially concerned with how the difference of actual and planned behaviours indicates how business performance is being impacted.

Is a Favourable variance always a good thing?

Obtaining a favorable variance (or, for that matter, an unfavorable variance) does not necessarily mean much, since it is based upon a budgeted or standard amount that may not be an indicator of good performance.

What is variable overhead variance?

The variable overhead spending variance is the difference between the actual and budgeted rates of spending on variable overhead. The variance is used to focus attention on those overhead costs that vary from expectations. The formula is: Actual hours worked x (Actual overhead rate – standard overhead rate)

How do you find variable efficiency variance?


Quote from video: So we've got our actual hours times the standard rate and then we've got the standard hours times the standard rate the difference between this and this is our efficiency variance.

How do managers plan for variable overhead costs?

How do managers plan for variable overhead​ costs? Planning to undertake only those variable overhead activities that add value for customers using the product or​ service, and to use the cost drivers in those activities in the most efficient way.

How variance analysis is useful for management?

Importance of Variance Analysis



Planning: Helps managers to budget smarter and more accurately. Control: Assists in more significant control management of departments and budgeting. Responsibility: Helps with the assignment of trust within an organisation. Monitoring: Helps to monitor success and failure.

What are the benefits of variance analysis?

Benefits of using variance analysis



Competitive advantage: Variance analysis helps an organization to be proactive in achieving their business targets, helps in identifying and mitigating any potential risks which eventually builds trust among the team members to deliver what is planned.

What is variance analysis what is its significance in decision making?

In other words, variance analysis is a process of identifying causes of variation in the income and expenses of the current year from the budgeted values. It helps to understand why fluctuations happen and what can / should be done to reduce the adverse variance. This eventually helps in better budgeting activity.

Why is overhead variance important?

An increase or decrease in depreciation expense. Variable overhead spending variance assists in forecasting the amount of labor and the wage rate required for future needs. It also helps in efficient use of resources due to better planning.

Which of the following would explain an adverse variable production overhead efficiency variance?

Solution(By Examveda Team)



The following that would explain an adverse variable production overhead efficiency variance are Employees were of a lower skill level than specified in the standard and Poor Quality material was difficult to process.

Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Also, in case where variable overhead rate is based on labor hours, the variable overhead efficiency variance does not offer any additional information than provided by the labor efficiency variance.

What does a favorable labor rate variance indicate?

A favorable labor rate variance indicates that the standard rate exceeds the actual rate.

What does a favorable direct materials cost variance indicate quizlet?

A favorable direct materials price variance indicates which of the following? The standard cost of materials purchased was greater than the actual cost of materials purchased.

Which of the following would explain an adverse variable production overhead efficiency variance?

Solution(By Examveda Team)



The following that would explain an adverse variable production overhead efficiency variance are Employees were of a lower skill level than specified in the standard and Poor Quality material was difficult to process.

Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Also, in case where variable overhead rate is based on labor hours, the variable overhead efficiency variance does not offer any additional information than provided by the labor efficiency variance.

What are the two variable manufacturing overhead variances what does each measure who within the organization would be responsible for each of these variances?

The two variable overhead variances are the variable overhead rate variance and the variable overhead efficiency variance. Production would generally be responsible for each of these variances. The primary fixed overhead variance is the fixed overhead spending variance.

How do you find variable efficiency variance?

Quote from video: So we've got our actual hours times the standard rate and then we've got the standard hours times the standard rate the difference between this and this is our efficiency variance.