Page 39 - UNISA Manac Cost Course Slides Part 1

TEST 3 - COSTING

Costing variances

• When absorption costing is applied: Under- or over-

recovery of overheads = Volume variance + Expenditure

variance.

• When variable costing is applied: Under- or over-recovery

of overheads = Expenditure variance.

• The volume variance is not applicable when variable

costing is applied.

• An adverse volume variance means that actual production

volume is less than the budgeted allocation base used.

• A favourable volume variance: actual production volume is

more than the budgeted allocation base used.

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