Variable production overheads
Variable production overheads are indirect production costs that vary with output and are allocated using actual use of production facilities. Allocate variable production overheads to units based on the actual use of production facilities. For example, if a machine consumes 2 of indirect materials per unit and 100 units are produced, the allocated variable overhead is 200, assuming normal usage and no abnormal waste. Examples can include production power that varies with machine usage, where it is an indirect cost.
Worked example
Indirect materials consumed in production may rise as output increases.
Common mistake
Distinguish variable overhead from direct materials and from fixed overhead allocated using normal capacity.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | F3 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA2 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |