Fixed Manufacturing Overhead Variances

Things You Must Know

Introduction to Accounting

Budgeted Fixed Overhead Dollars —

The total amount that the company expects to spend for fixed overhead costs for an estimated level of production.


Applied Fixed Overhead Costs —

The amount the company estimated they would spend for the actual number of units produced.


Use the formula:

Actual units produced x activity required for each one x standard cost

(standard cost is the predetermine overhead rate).


Budget Variance —

Actual dollars spent compared to what it should have cost if the company produced the amount of product expected for the year.

 This variance tells you if you spent more or less total dollars than expected.


Volume Variance —

Estimated cost of what you expected to produce compared to what the units you actually did produce should have cost. The difference is caused by not producing as much or producing more actual units than expected.


Formulas to know:

Predetermined Overhead Rate per Activity:

Total Fixed Manufacturing Overhead $  = $ per
     Total Budgeted Annual Activity


Fixed Overhead Variances: