Fixed overhead variances-PEV

Re:Fixed overhead variances-PEV

Just to remind us, the question states:-

(c) Prepare a statement for November which reconciles the fixed overheads
incurred with the fixed overheads absorbed in production.

So we must reconcile actual overhead cost incurred with the standard overhead cost of what we produced.

These two values are different if:

there is an expeniture variance

, and/or

if there is a difference between budgeted production and actual production

So you can present your answer in one of two ways:-

Fixed overheads absorbed in production (Standard overhead cost of actual production)

+/- Fixed Overhead Expenditure variance

+/-Fixed Overhead Volume Variance

= Fixed Overheads Incurred

or (as your question suggests)

Fixed overheads absorbed in production (Standard overhead cost of actual production)

+/- Fixed Overhead Expenditure variance

+/-Fixed Overhead Capacity Variance

+/-Fixed Overhead Efficiency Variance

= Fixed Overheads Incurred

Both approach will answer the question as both break down the cause of the difference into the various variances.

sandy.hood@chichester.ac.uk