Managerial Accounting: "Chapter 10, Section 7: Using Variance Analysis with Activity-Based Costing"

If a company, such as Jerry’s Ice Cream is using ABC (activity-based costing) it cannot establish one standard variable overhead rate and standard quantity based on one cost driver. The ABC companies must establish several standard variable overhead rates and quantities, each having its own cost driver. Regardless of whether a company uses the traditional costing approach or an activity-based costing approach, the process of performing variance analysis is consistent. Suppose Jerry’s Ice Cream identified three significant activities, let’s see how ABC can be used with variance analysis!