Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 32

Fixed Cost Variances

Information on Carney Company’s fixed overhead costs follows:

Overhead applied	$360,000
Actual overhead	385,500
Budgeted overhead	369,000

Required

What are the fixed overhead price and production volume variances? (Refer to Exhibit 16.13 for the format to use.)

Step 1 of 2

Fixed overhead price variance:

Fixed overhead price variance is the difference between the flexible budgets fixed overhead and the actual fixed overhead incurred.

Fixed overhead production volume variance:

This is the difference between the budgeted fixed overheads and fixed overheads applied.

The change is a result from the change in the production levels of output.