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## Definition and Explanation:

The controllable variance is the difference between actual expenses incurred and the budget allowance based on standard hours allowed for work performed. This variance may be favorable or unfavorable.

If the actual factory overhead is more than the budget allowance based on standard hours allowed for work performed, the variance is called unfavorable controllable variance.

If the actual factory overhead is less than the budget allowance based on standard hours allowed for work performed, the variance is called favorable controllable variance.

Overhead controllable variance is calculated when overall or net overhead variance is further analyzed using two variance method. Other variance that is calculated in two variance method is volume variance.

## Formula:

Following formula is used for the calculation of this variance:

 Controllable variance = Actual Factory Overhead - Budgeted Allowance Based on Standard Hours Allowed

## Example:

From the following data calculate factory overhead controllable variance:

 Actual overhead \$7,384 Actual hours used 3,475 Units produced during the period 850 Standard hours for one unit 4 Standard factory overhead rate: Variable \$1.20 Fixed \$0.80 \$2.00 Normal Capacity in labor hours 4000 hours

### Solution:

 Actual factory overhead \$7,384 Budgeted allowance based on standard hours allowed: Fixed expenses budgeted \$3,200 Variable expenses (3,400* standard hours allowed × \$1.20 variable overhead rate) 4,080 \$7,280 Controllable variance \$104 unfav *Standard hours allowed = Units produced during the period × Standard time allowed for on unit 3,400 = 850 units × 4 hours

This variance consists of variable expense only and can also be computed as follows:

 Actual variable expense: Actual overhead \$7,384 Fixed expenses budgeted (4000 × 0.80) \$3,200 \$4,184 Variable expenses for standard hours allowed (3,400*× \$1.20) 4,080 Controllable variance \$104 unfav

## Who is Responsible For Controllable Variance?

The controllable variance is the responsibility of the department managers to the extent that they can exercise control over the costs to which the variances relate.

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