1. AMIS 212 Introductory Managerial Accounting
Chapter 10 Module 4
CHAPTER 1 MODULE 1
AMIS 212 Introductory Managerial Accounting
Professor Marc Smith

2. Chapter 10 Module 4: VOVH Variances
2 Variable Overhead Variances:
(1) Variable overhead spending variance
(2) Variable overhead efficiency variance
● A positive variance is referred to as an
unfavorable variance
● A negative variance is referred to as a
favorable variance

3. Chapter 10 Module 4: VOVH Variances
VOVH Spending Variance =
Actual Variable Overhead Cost - (AH x SR)
VOVH Efficiency Variance =
(AH x SR) (SH x SR)
NOTE: The standard hours (SH) is calculated:
(standard hours of DL per unit x
number of units produced)

4. Chapter 10 Module 4: VOVH Variances
VOVH Spending Variance =
Actual Variable Overhead Cost - (AH x SR)
● measures the difference between what was actually spent
on variable overhead and what should have been spent,
according to the standards
VOVH Efficiency Variance = (AH x SR) - (SH x SR)
● measures the difference between the actual quantity of
the activity (direct labor hours) used and how much
should have been used, according to the standards

5. Chapter 10 Module 4: Example #1
VOVH Spending Variance =
Actual variable overhead cost - (AH x SR)
104, (15,300 x 6.80)
104, ,040 = $459 unfavorable
● Betty DeRose spent $459 more on variable
overhead than she should have, given standards

6. Chapter 10 Module 4: Example #1
VOVH Efficiency Variance = (AH x SR) - (SH x SR)
(15,300 x 6.80) [(67,500 x 0.25) x 6.80]
104, ,750 = $10,710 favorable
● Betty DeRose used $10,710 less in the activity
(direct labor) than she should have, given the
standards

7. Chapter 10 Module 4: Example #1
Total VOVH Variance =
VOVH Spend Variance + VOVH Effic Variance
459 U ,710 F
,710
Total VOVH Variance = 10,251 F

8. Chapter 10 Module 4: Review Question
Hanson, Inc. has the following variable overhead standards to manufacture one units of its product, called a zippy:
1.5 hours per zippy at $3 per hour
Last week 1,550 direct labor hours were worked to make 1,000 zippies and $5,115 was spent for variable overhead. What was the variable overhead spending variance?
a. $465 U
b. $400 F
c. $335 U
d. $300 F
5, (1,550 x $3.00) = $465 U 8

9. Chapter 10 Module 4: Review Question
Hanson, Inc. has the following variable overhead standards to manufacture one units of its product, called a zippy:
1.5 hours per zippy at $3 per hour
Last week 1,550 direct labor hours were worked to make 1,000 zippies and $5,115 was spent for variable overhead. What was the variable overhead efficiency variance?
a. $435 U
b. $435 F
c. $150 U
d. $150 F
(1,550 x $3) - [(1,000 x 1.5) x $3] = $150 U 9