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Overall or Net Factory Overhead Variance:

Definition:

Overall or net factory overhead variance is the difference between actually incurred factory overhead and expenses charged into process using the standard factory overhead rate.

Formula of Overall or Net Factory Overhead Variance:

Overall or net overhead variance is calculated by the following formula:

[Actual overhead – Overhead charged to production]

Example:

At the end of a month the data for a department are as follows:

This unfavorable overall overhead variance needs further analysis to reveal detailed causes for the variance and to guide management toward remedial action. This analysis is made by using:

The two variance method:

1. Controllable variance
2. Volume variance

The three variance method:

1. Spending variance
2. Idle capacity variance
3. Efficiency variance

The four variance method:

1. Spending variance
2. Variable efficiency variance
3. Fixed efficiency variance
4. Idle capacity variance

You may also be interested in other articles from "standard costing and variance analysis" chapter

1. Standard Costs and Management By Exception
2. Setting Standard Costs - Ideal Versus Practical Standards
3. Direct Materials Price and Quantity Standards
4. Direct Materials Price Variance
5. Direct Materials Quantity Variance
6. Direct Labor Rate and Efficiency Standards
7. Direct Labor Rate/Price Variance
8. Direct Labor Efficiency | Usage | Quantity Variance
9. Manufacturing Overhead Standards
10. Overall or net factory overhead variance.
11. Controllable variance
12. Volume variance
13. Spending variance
14. Idle capacity variance
15. Efficiency variance
16. Spending variance
17. Variable efficiency variance
18. Fixed efficiency variance
19. Idle capacity variance
20. Mix and Yield Variance - Definition and Explanation
21. Materials Mix and Yield Variance
22. Labor Yield Variance
23. Factory Overhead Yield variance
24. Variance Analysis and Management By Exception
25. Managerial importance and usefulness of variance analysis
26. Advantages and Disadvantages of Standard Costing System
27. Standard Costing Discussion Questions and Answers
28. Standard Costing and Variance Analysis Formulas
29. Standard Costing and Variance Analysis Problems and Solution
30. Standard Costing and Variance Analysis Case Study

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