Fixed overhead variances relate to

Fixed overhead variances relate to

• A. Differences between budgeted and actual fixed overhead costs
• B. Only variable overheads
• C. Depreciation charges only
• D. Sales variances

Answer: (A)

Fixed overhead variances measure how far actual fixed overhead costs differ from what was budgeted. Since fixed overhead is not tied to output in the short term, the analysis splits into two parts: an expenditure (spending) variance, comparing actual fixed overhead with the budget, and a volume variance, reflecting the difference between the fixed overhead absorbed into production (based on actual output) and the budgeted fixed overhead. The overall variance equals actual fixed overhead minus absorbed fixed overhead, tying directly to differences between budgeted and actual fixed overhead costs. This concept is not about variable overheads, depreciation alone, or sales variances.

Fixed overhead variances measure how far actual fixed overhead costs differ from what was budgeted. Since fixed overhead is not tied to output in the short term, the analysis splits into two parts: an expenditure (spending) variance, comparing actual fixed overhead with the budget, and a volume variance, reflecting the difference between the fixed overhead absorbed into production (based on actual output) and the budgeted fixed overhead. The overall variance equals actual fixed overhead minus absorbed fixed overhead, tying directly to differences between budgeted and actual fixed overhead costs. This concept is not about variable overheads, depreciation alone, or sales variances.