Page 42 - MAC4861_2 Costing Class Slides Part 1
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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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