Fixed Overhead Variances

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cs_1988
cs_1988 Registered Posts: 231 Dedicated contributor 🦉
in AAT Level 4 (Level 8 in Scotland)
Hi Guys,

Please can someone give me the correct formula's, my book state's two, both give differant answers!!!

Fixed Overhead Expenditure Variance - Differance between Budgeted and Fixed Overeads, the only one i get!!

But can someone please give the formula's to calculate -
Fixed Overhead Volume Variance

Fixed Overhead Capacity Ratio

Fixed Overhead Efficiency Variance

Thanks In Advance
:confused1:

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  • Khurram Taj
    Khurram Taj Registered Posts: 29 Regular contributor ⭐
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    Hello,

    I have write down all three formulas for fixed overhead variances.

    Fixed Overhead Volume Variance =
    Standard hours/unit for actual production- Budgeted hours/unit for production x Overhead absorption rate

    Fixed Overhead Capacity Ratio =
    Actual hours/unit for actual production - Budgeted hours/unit for production x Overhead absorption rate

    Fixed Overhead Efficiency Variance =
    Standard hours/unit for actual production - actual hours/unit for actual production x Overhead absorption rate

    If you have anymore question in this matter then please do not hesitate to ask.

    Best regards

    Khurram Taj
  • wolfe
    wolfe Registered Posts: 121 Dedicated contributor 🦉
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    hey

    the FIXED OVERHEAD EXPENDITURE VARIANCE formula is:
    BUGETED FIXED OVERHEADS - ACTUAL OVERHEADS and not what you have written.

    FIXED OVERHEAD VOLUME VARIANCE:(1)IF OVERHEADS ARE ABSORBED ON UNIT BASIS:
    (ACTUAL OUTPUT - BUDGETED OUTPUT) OAR/UNIT

    (2)IF OVERHEADS ARE ABSORBED ON HOURLY BASIS FOR EXAMPLE LABOUR OR MACHINE HOUR
    (STANDARD HOURS FOR ACTUAL OUTPUT- BUDGETED HOURS) OAR/HOUR

    FIXED OVERHEAD VOLUME EFFICIENCY VARIANCE:
    (STANDARD HOURS FOR ACTUAL OUTPUT-ACTUAL HOURS) OAR/HOUR

    FIXED OVERHEAD VOLUME CAPACITY VARIANCE:
    (ACTUAL HOURS -BUDEGETED HOURS) OAR/HOUR
  • cs_1988
    cs_1988 Registered Posts: 231 Dedicated contributor 🦉
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    Cheers Khurram,

    Had a chat with my tutor and it appears i have a text book with a mistake in!! But all sorted, thanks for your help!

    Chris
  • Londina
    Londina Registered Posts: 814 Epic contributor 🐘
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    cs_1988 wrote: »
    Cheers Khurram,

    Had a chat with my tutor and it appears i have a text book with a mistake in!! But all sorted, thanks for your help!

    Chris

    may I ask which book is it? just in case mine is incorrect too...
  • cs_1988
    cs_1988 Registered Posts: 231 Dedicated contributor 🦉
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    It is the Osbourne book, but apparently they corrected it, and i got one of the very early versions from 2008! The above formula's are right though!

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