fixed production overhead variance

Popular Terms
The difference between the incurred cost of fixed production overhead and the amount of overhead actually absorbed. The amount of overhead absorbed is calculated by using the overhead rate, which is the total fixed production overhead (the numerator) divided by the budgeted labor hours of produced units (the denominator). Particular attention is paid to whether the overhead is over-absorbed or under-absorbed, with the absorption being determined by how close the estimated numerator and denominators are to the actual figure. There are several key types of fixed production overhead variances: fixed production overhead expenditure variance, fixed production overhead volume variance, fixed production overhead volume efficiency variance, fixed production overhead volume capacity variance.


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