On budgeted variable overhead rates

On budgeted variable overhead rates

On budgeted variable overhead cost rate per output unit

=

Budgeted input allowed per output unit (Refer to variable overhead efficiency variance)

x

Budgeted variable overhead cost rate per input unit (Refer to variable overhead spending variance)

E.g.

On budgeted variable overhead cost rate per output unit

[$8 per jacket]

=

Budgeted input allowed per output unit

[0.40 hour per jacket]

x

Budgeted variable overhead cost rate per input unit

[$20 per hour]