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CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis

Under standard costing, the variable overhead expenditure variance is computed as the difference between:

The variable overhead expenditure variance is actual hours worked at the standard variable overhead rate less the actual variable overhead incurred. It captures spending differences only, while the difference in hours is shown separately as the efficiency variance.

  1. AStandard variable overhead for actual output and standard rate times actual hours
  2. BActual hours at standard rate and actual variable overhead incurredCorrect
  3. CStandard hours for actual output at standard rate and actual hours at standard rate
  4. DBudgeted variable overhead and standard variable overhead for actual output

Explanation

Variable overhead expenditure (spending) variance = (Actual hours x Standard rate) - Actual variable overhead. It isolates price/spending differences. Option C describes the efficiency variance, which measures hours, not spending.

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