Fixed overhead expenditure variance
The fixed overhead expenditure variance is the difference between budgeted fixed overhead and actual fixed overhead for the period on a comparable cost scope. Budget minus actual is favourable-positive. It is separate from fixed overhead volume variance under absorption costing, which reflects output relative to the rate’s budget activity. Fixed costs may change because of prices, extra capacity, timing or discretionary decisions, so analyse the cause rather than assume the budget is permanently immutable.
Worked example
Budgeted fixed overhead is $50,000 and actual $52,000. Expenditure variance is $2,000 adverse, regardless of how much overhead was absorbed.
Common mistake
Do not compare actual overhead with absorbed overhead and call the whole difference expenditure variance.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
