Fixed overhead volume Variance Formula

Fixed overhead volume Variance Formula

Fixed overhead volume variance is calculated by the following formula. Variable overheads volume variance may be favorable or adverse.

Standard Rate x (Budgeted Production – Actual Production)

Example

Actual Production = 1200

Budgeted Production = 800

Standard absorption Rate= $ 6

Solution

Standard Rate x (Budgeted Production – Actual Production)

= $ 6 x (1200-800)

= $6 x 400

=2400 Favorable

Variance is favorable because actual production is more than budgeted.