← Job cost subsystem for an entity (internal)
Under- and over-applied overhead
Two different causes, two different fixes.Reading a variance correctly
- Compare ACTUAL overhead incurred against actual overhead APPLIED (rate × actual hours) — the gap is the variance.
- Ask WHY: did actual overhead spending differ from budget, or did actual activity (hours) differ from the budgeted volume the rate was set against?
- An overhead-spend cause points to cost control; an activity-volume cause points to reviewing the budgeted hours used to SET the rate next time.