A two-variance analysis of overhead consists of a spending variance and a volume variance.

Question

Quizplus · Accepted Answer

A two-variance analysis of overhead is commonly used in cost accounting to understand the differences between budgeted and actual overhead costs. The spending variance measures how much of the total variance is due to a difference in actual spending compared to the budgeted amount, while the volume variance measures the difference in overhead costs due to changes in activity levels. Therefore, the statement is true.

A Two-Variance Analysis of Overhead Consists of a Spending Variance