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.

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.

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.

Fixed Overhead Efficiency Variance Formula

Fixed Overhead Efficiency Variance Formula

Fixed overheads efficiency Variance is difference between standard hr and actual hour taken by the production and such difference is measured at standard rate.

Fixed overhead efficiency variance = Standard rate (Standard hour – Actual Hrs)

Example

Unit produced = 5000

Standard hrs = 5 Hr per unit

Actual Hours = 24,000

Standard Rate = $ 6

Solution

Standard Hours = Production x standard hours =

5000 units x 5 hr= 25,000 hrs

Fixed overhead efficiency variance = Standard rate (Standard hour – Actual Hrs) 

= $ 6 x (25,000-24,000)

= $ 6 x 1000

= $ 6000

Fixed Overhead Expenditure Formula

Fixed Overhead Expenditure Formula

Fixed overhead expenditure is difference between budgeted fixed overhead expenditure and actual fixed overhead expenditure. This variance can be expressed as under

Fixed overhead Expenditure = Budgeted FOH – Actual FOH

Example

Budgeted Expenditure = 40,000

Actual Expenditure = 45,000

Solution

Fixed overhead Expenditure = Budgeted FOH – Actual FOH

=40,000-45000

=5000

Fixed Overheads Total Variance Formula

Fixed Overheads Total Variance Formula

Fixed overhead Total variance is difference between Fixed overhead incurred and Fixed overhead observed. Fixed overhead total variance may be favorable or adverse.

Fixed Overhead Total Variance =FOH Absorbed – FOH incurred

Example

Unit Produced= 10,000

Absorption Rate = $ 4 per unit

Actual Fixed overheads = 50,000

Solution

Absorbed = unit produced x Rate

 = 10,000 x $ 4

= $ 40,000

Fixed Overhead Total Variance = Fixed overhead incurred – FOH Absorbed

= 50,000-40,000

=10,000 (Fixed overhead total variance)

 Fixed overhead variance amounting 10,000/- is favorable.

Variable Overhead Expenditure Variance Formula

Variable Overhead Expenditure Variance Formula

Variable overhead Expenditure variance can be calculated by the following simple formula. Variable overhead expenditure variance can be favorable or adverse.

Actual Variable Overhead – (Actual Hr x Standard Rate per Hr)

Example

Actual Expenditure 100,000

Actual Hr 25,000

Standard Rate $ 5

Solution

Actual Variable Overhead – (Actual Hr x Standard Rate per Hr)

= 100,000 – (25,000 x 5)

= 100,000- 125,000

=-25,000

Variable Overhead Efficiency Variance Formula

Variable Overhead Efficiency Variance Formula

Variable overheads efficiency variance can be calculated by the following formula. Variable overhead efficiency variance may be favorable or adverse.

Variable overhead efficiency = Standard Rate x (Standard Hr-Actual Hr)

Example

Standard rate = $ 10

Standard Hr = 8 Hr per unit

Unit produced= 10,000

Actual Hr = 70,000

Solution

Standard hour = units produced x Hr taken per unit

= 10,000 x 8

=80,000 Hr

Variable overhead efficiency = Standard Rate x (Standard Hr-Actual Hr)

= 10 x (70,000-80,000)

= 10 x -10,000

=-100,000 (adverse Variable overhead efficiency variance).