Explain Fixed Overhead Variance. How are they computed?
Fixed overhead forms a major portion of production cost. It is the difference between the standard overhead costs and the total actual overhead costs. Thus it is important to check variation from the standard fixed overheads so that corrective actions may be taken by the management. Fixed Overhead Variance is calculated on the basis of units of production or on the basis of hours.
The common methods used for analyzing the fixed overheads variances are:
- Overhead cost Variance
- Expenditure Variance
- Volume Variance
- Efficiency Variance
- Capacity Variance
- Calendar Variance