1. Prepared by,
Pawan Kumar Gupta,
Assistant Professor, Department of Commerce,
MGGAC, Mahe

2. Overhead cost variance
An overhead cost variance is the difference
between the amount of overhead applied during the
production process and the actual amount of overhead
costs incurred during the period. The overhead cost
variance can be calculated by subtracting the standard
overhead applied from the actual overhead incurred
during the period.
In simple words,
OHCV= Standard overhead- Actual overhead

3. Classification of Overhead cost Variance
Overhead
cost
variance
Variable
overhead cost
variance
Variable
overhead
expendit
ure
variance
Variable
overhead
efficiency
variance
Fixed overhead
cost variance
Calendar
variance
Capacity
variance
Efficiency
variance

4. Explanation
1.Variable overhead cost variance:- It is the variance or
deviation in between the standard variable overhead for
actual production of units and Actual overhead incurred.
VOCV= Standard variable overhead rate per unit × Actual
output – Actual variable overheads incurred
2. Variable overhead expenditure variance:- This is the
variance in between the two different rates of variable
overheads viz. standard rate and actual rate; denominated
in terms of Actual hours taken consumed by the firm.
VOEV= Actual Hours (Standard Rate – Actual Rate)

5. 3. Variable overhead efficiency variance:-It is
another variance which is in between the standard
hours for actual output and actual hours consumed
during the production; denominated in terms of
standard rate.
= Standard Rate (Standard Hours for Actual Output
– Actual Hours)

6. Fixed overhead cost variance
Fixed overhead cost variance depends on (a) fixed
expenses incurred and (b) the volume of production
obtained.
The volume of production depends upon,
(i) efficiency.
(ii) the days for which the factory runs in a week
(calendar variance)
(iii) capacity of plant for production (Capacity
variance).
FOCV= Actual Output (Fixed Overhead Rate - Actual Fixed
Overheads)

7. (a) Fixed Overhead expenditure Variance- It is also known
as budget variance. It is that portion of the fixed overhead
which is incurred during a particular period due to the
difference between the budgeted fixed overheads and the
actual fixed overheads.
Fixed Overhead expenditure variance
=Budgeted fixed overhead-Actual fixed overhead
(b) Fixed Overhead Volume Variance- This variance is the
difference between the standard cost of overhead absorbed in
actual output and the standard allowance for that output. This
variance measures the over of under recovery of fixed
overheads due to deviation of actual output form the budgeted
output level. This variance contains three sub variance,
(i)- Efficiency variance, (ii)- Capacity variance and, (iii)-
Calendar variance

8. (i) On the basis of units of output-
Fixed Overhead Volume Variance = Standard Rate
(Budgeted Output-Actual Output)
OR
=(Budgeted Cost –Standard Cost)
(ii) On the basis of standard hours-
Fixed Overhead Volume Variance
=Standard Rate per hour (Budgeted Hours-Standard Hours)
,
We can calculate total fixed overhead volume
variance as under

9. Thank you