Page 122 - P1 Integrated Workbook STUDENT 2018
P. 122
Chapter 7
6.3 Review of fixed overhead variances
Total fixed overhead
variance
Expenditure Volume variance
variance – Did the organisation
Did the fixed overhead
–
cost more/less than absorb more/less
expected? overhead than expected?
Capacity variance Efficiency variance
– Did employees work – Did employees work
more/less hours than faster/slower than
expected? expected?
6.4 Causes of fixed overhead variances
Expenditure variances are caused by spending in excess of the budget.
A more detailed analysis of the expenditure variance would be needed to
establish why actual expenditure has been higher or lower than budget.
Volume, capacity and efficiency variances have similar causes to those for a
sales volume variance (extra sales = extra production) or by deliberate
changes in inventory policies.
118
