Fixed Overhead Capacity Variance Formula

Fixed Overhead Capacity Variance Formula

Fixed overhead Capacity variance is the difference between budgeted hours and actual hour worked and such difference is measured at standard hours.

Fixed overhead capacity = standard rate x (budgeted hours x actual Hours)

Example

Budgeted Unit Produced = 1400

Actual production= 1200

Budgeted hour per unit = 6

Actual hours taken = 7000

Standard absorption rate= 10

Calculated fixed capacity variance?

Solution

Budgeted hours = 1400 x 6= 8400

Fixed overhead capacity = standard rate x (budgeted hours x actual Hours)

= $ 10 x (8400-7000)

= $ 10 – 1400

= 14000 (Adverse)

Actual hour are lower than budgeted hours.