Overhead Application Rate
= Estimated Factory Overhead / Estimated Direct Labor Hours

• EU[Equivalent Unit]
• WIP[Work-In-Progress]

• Direct Method
• Step Method

Cost allocation Bases

Factory cafeteria	Number of employees
Factory maintenance	Square footage
Factory storeroom	Material requisition
General factory administration	Direct labor hours
Power department	Kilowatt hour used

• Price Variance

  V_p = (AP - SP) * AQ

• Efficiency Variance

  V_e = (AQ - SQ) * SP

1. Variable Overhead
   • Efficiency Variable

     VHOV_e = (AQ - SQ) * SP

   • Spending Variable

     VOHV_s = (AP - SP) * AQ

2. Fixed Overhead
   1. FOHV[Fixed OverHead Variance]

      Total FOHV = FOH incurred - FOH applied
      = FOH incurre - [FOH standard rate * standard input allowed]
      

      FOH incurred		FOH budget		FOH applied
      	Budget(Spending) Varinace			Volume Variance
      			Total FOH Variance

   2. Volume Variance

      Volume Variance = Budgeted FOH - FOH applied
      = (Budgeted standard inputs - Standard inputs allowed) * FOH Standard Rate

   3. Budget Variance

      Budget Variance = Actual FOH - Budgeted FOH
      = Actual FOH - (FOH Standard Rate*Budgeted production)

1. 2-way analysis

   Volume Variance	FOH volume variance
   Budget Variance	Variable OH efficiency variance + Variable OH spending variance + Fixed OH beudget variance

2. 3-way analysis

   Volume Variance	FOH volume variance
   Efficiency Variance	Variable OH efficiency variance
   Spending Variance	Variable OH spending variance + Fixed OH budget variance

3. 4-way analysis

   FOH Volume variance

   Variable OH efficiency variance

   Variable OH spending variance

   FOH budget variance