[mikecuh]

I cannot for the life of get this subject down. I feel like every time I learn it I just end up even more frustrated and more confused. Can somebody please explain this to me?

[M.O.D.]

Yes, I can explain. There is variable OH variance and fixed OH variance. Both OHs are estimates based upon annual spending divided by estimated annual production. This OH is allocated to WIP.

If spending is different than allocation then variances arise.

Before you can understand spending and efficiency variances, you have to understand standard costing.

Standard costing involves standard price and standard quantity of materials and labor used in manufacturing.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Author]

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