PEV Fixed Overhead Variances
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HayleyM
Registered Posts: 63 Regular contributor ⭐
Hi,
I am just going over my notes on fixed overhead variances and I have managed to get myself confused somehow. Please can someone confirm whether the following calculations for each of the variances are correct?
Fixed Overhead expenditure variance:
(Budgeted units x absorption rate)  Actual fixed overhead
Fixed Overhead efficiency variance:
(Actual production x absorption rate)  (Budgeted production x absorption rate)
Total fixed overhead variance:
Actual fixed overhead (actual units x standard hour x absorption rate)
Also, please could someone explain what the fixed overhead capacity variance and the fixed overhead volume variances are? My tutor didn't cover these variances and I only know about them because I have noticed people talking about them in other posts. Is this something that is covered in the PEV exams?
Thanks in advance
I am just going over my notes on fixed overhead variances and I have managed to get myself confused somehow. Please can someone confirm whether the following calculations for each of the variances are correct?
Fixed Overhead expenditure variance:
(Budgeted units x absorption rate)  Actual fixed overhead
Fixed Overhead efficiency variance:
(Actual production x absorption rate)  (Budgeted production x absorption rate)
Total fixed overhead variance:
Actual fixed overhead (actual units x standard hour x absorption rate)
Also, please could someone explain what the fixed overhead capacity variance and the fixed overhead volume variances are? My tutor didn't cover these variances and I only know about them because I have noticed people talking about them in other posts. Is this something that is covered in the PEV exams?
Thanks in advance
0
Comments

Hi Hayley,
I have this in excel format so, not sure how it's going to read on here and can't seem to send excel sheets ?
If it's confusing, forward your email and I'll send you the file.
Cheers
Jim
Fixed Overhead Variances
Total Fixed Overhead Variance
SCAC
Breaks down into Expenditure and Volume below.
Fixed O/H Expediture Variance Fixed O/H Volume Variance
BCAC (AVBV)*OAR per unit
or (SHBH)*OAR per unit
Volume variance breaks down into efficiency and capacity below (when relating to labour)
Fixed O/H Efficiency Variance Fixed O/H Capacity Variance
(SHAH)*OAR/Hour (AHBH)*OAR/Hour
Volume variance only broken down into efficiency and capacity, when relating to labour (hours)
ie. Are they working efficiently ? Are they working to full capacity ?
SC = Standard Cost
AC = Actual Cost
BC = Budgeted Cost
AV = Actual Volume
BV = Budgeted Volume
SH = Standard Hours
AH = Actual Hours
BH = Budgeted Hours
OAR = Overhead Absorbtion Rate0 
Yep, it's rubbish !0

I'm struggling with variances too  I keep getting them all the wrong way round; I chucked the towel in on a past paper yesterday.
Anyone got any helpful ideas for 'locking them into your brain' ?????
Anna xFMAAT  AAT Licensed Member in Practice  Pewsey, Wiltshire0 

Thanks Jimmyboy. That is a massive help0

My problem is that I just do not know what to revise for, for PEV. I know that you need to know the variances and the ratios. But other than that I just don't know what to revise. Has anyone got a list of some sort that they are working their way through?!
Thanks0
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