fixed production overhead volume efficiency variance

Definition

The difference between the actual number of hours worked to produce a set amount of units and the budgeted number of hours. This figure is then multiplied by the overhead rate for an hour of labor. For example, if a company budgeted 1,000 hours to produce 2,000 units at overhead rate of $2/hour, but actually used 1,800 hours to produce the units then it has a favorable variance of 200 hours. This is multiplied by the $2/hour rate to bring the fixed production overhead volume efficiency variance to $400.