# PEV Fixed Overhead Variances

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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

## Comments

• Registered Posts: 32 Regular contributor ⭐
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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 e-mail and I'll send you the file.
Cheers
Jim

Fixed Overhead Variances

Total Fixed Overhead Variance
SC-AC

Breaks down into Expenditure and Volume below.

Fixed O/H Expediture Variance Fixed O/H Volume Variance
BC-AC (AV-BV)*OAR per unit
or (SH-BH)*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
(SH-AH)*OAR/Hour (AH-BH)*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 Rate
• Registered Posts: 32 Regular contributor ⭐
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Yep, it's rubbish !
• Registered Posts: 1,326 Beyond epic contributor 🧙‍♂️
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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 x
FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
• Registered Posts: 32 Regular contributor ⭐
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Try this ?
• Registered Posts: 63 Regular contributor ⭐
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Thanks Jimmyboy. That is a massive help
• Registered Posts: 63 Regular contributor ⭐
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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?!

Thanks
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