Which term describes the difference between actual total overhead and the standard overhead applied?

Which term describes the difference between actual total overhead and the standard overhead applied?

• A. Labor variance
• B. Volume variance
• C. Fixed overhead variance
• D. Overhead variance

Answer: (D)

Overhead variance shows the gap between actual total overhead and the standard overhead applied to production. It captures how well overhead costs are controlled when using the standard rate, reflecting the overall performance of overhead management. A favorable outcome occurs when actual overhead is less than applied overhead, and an unfavorable outcome when actual overhead exceeds what was applied. This broad term can be broken down into fixed and variable components if you need to isolate the effects, but the general idea is the comparison between what happened in reality and what was allocated using the standard rate. The other terms focus on specific areas (labor costs, volume effects on capacity, or just the fixed portion), so they don’t describe the total overhead difference.

Overhead variance shows the gap between actual total overhead and the standard overhead applied to production. It captures how well overhead costs are controlled when using the standard rate, reflecting the overall performance of overhead management. A favorable outcome occurs when actual overhead is less than applied overhead, and an unfavorable outcome when actual overhead exceeds what was applied. This broad term can be broken down into fixed and variable components if you need to isolate the effects, but the general idea is the comparison between what happened in reality and what was allocated using the standard rate. The other terms focus on specific areas (labor costs, volume effects on capacity, or just the fixed portion), so they don’t describe the total overhead difference.