Variance Analysis (B4:M7)

Question 1

debit balances in the overhead account are ___, while credit balances in the overhead account are ___.

Answer 1

unfavorable (bc OH was under applied); favorable (bc OH was over applied)

Question 2

what causes a production volume variance?

Answer 2

difference in the planned level of the base used for overhead allocation and the actual level achieved

Question 3

how do you calculate a flexible budget variance?

Answer 3

actual amount - flexible budget amount*

*standard (budgeted) rate x actual output

remember that the flex number is basically the budgeted rate “flexed” to actual output so a better comparison between budget and actual can be made