Questions: The difference between the actual level of activity and the standard activity allowed for the actual output x the variable part of the predetermined overhead rate is the variable overhead variance.

The statement provided is describing a concept related to cost accounting, specifically dealing with variances in overhead costs. Let's break it down:

The variable overhead variance is a measure used in cost accounting to assess the difference between what was expected to be spent on variable overheads and what was actually spent. It helps in understanding how efficiently resources are being used.

1. Actual Level of Activity: This refers to the actual amount of work done or units produced during a period.

2. Standard Activity Allowed for Actual Output: This is the amount of activity that should have been used for the actual output, based on standard rates. It is calculated by multiplying the actual output by the standard rate of activity.

3. Variable Part of the Predetermined Overhead Rate: This is the portion of the overhead rate that varies with the level of activity. It is predetermined based on expected costs and activity levels.

The variable overhead variance can be broken down into two components:

• Variable Overhead Spending Variance: This measures the difference between the actual variable overhead costs incurred and the expected costs based on the actual level of activity.

• Variable Overhead Efficiency Variance: This measures the difference between the standard cost allowed for the actual output and the actual cost incurred, focusing on the efficiency of resource usage.

In summary, the variable overhead variance is a key metric in cost accounting that helps businesses understand discrepancies in overhead costs, allowing them to identify areas for improvement in cost management and operational efficiency.