Define Fixed Overhead Variance

Question

Give a short introduction about the term ‘Fixed Overhead Variance’?

Answer 1

Fixed overhead forms a chief segment of production cost. It is the dissimilarity between the total actual overhead costs and the standard overhead costs. Therefore it is vital to verify dissimilarity from the standard fixed overheads so that counteractive actions might be taken through the management. Fixed Overhead Variance is determined on the basis of units of production.

The ordinary techniques employed for examining the fixed overheads variances are illustrated below:

i) Variance Expenditure Variance
ii) Overhead cost
iii) Efficiency Variance
iv) Volume Variance
v) Calendar Variance
vi) Capacity Variance