# 85 12.9: Fixed Manufacturing Overhead Variance Analysis

• Last updated
Dec 28, 2020
• Anonymous
• LibreTexts

## Learning Objectives

• Calculate and analyze fixed manufacturing overhead variances.

Question: Many organizations also analyze fixed  manufacturing overhead variances. Recall from earlier chapters that manufacturing companies are required to assign fixed manufacturing overhead costs to products for financial reporting purposes (this is called absorption costing ). It is common for companies such as Jerry’s Ice Cream to apply fixed manufacturing overhead costs to products based on direct labor hours, machine hours, or some other activity. Companies using a standard costing system apply fixed overhead based on a standard dollar amount per unit produced (this calculation is shown in the footnote to Figure 12.12). Assume Jerry’s uses direct labor hours to assign fixed overhead costs to products shown in Figure 12.12. How is this information used to perform fixed overhead cost variance analysis?

 

## Fixed Overhead Spending Variance Calculation

Question: How is the fixed overhead spending variance calculated?

 

## Fixed Overhead Production Volume Variance Calculation

Question: How is the fixed overhead production volume variance calculated?

 

### Comparison of Fixed and Variable Overhead Variance

Question: What are the similarities and differences between the fixed and variable overhead variances?

 

Note

Two variances are calculated and analyzed when evaluating fixed manufacturing overhead. The fixed overhead spending variance is the difference between actual and budgeted fixed overhead costs. The fixed overhead production volume variance is the difference between budgeted and applied fixed overhead costs. There is no efficiency variance for fixed manufacturing overhead.

Review problem 12.8

This review problem is based on the budget information presented in Chapter 12 review problems and variance analysis information presented in Chapter 12 review problems. The following information is for Carol’s Cookies:

Figure 12.13: .

 

## Definitions

1. The difference between actual and budgeted fixed overhead costs.
2. The difference between the budgeted and applied fixed overhead costs.

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