Fixed overhead total variance — Accounting glossary

Under standard absorption costing, fixed overhead total variance compares fixed overhead absorbed for actual output with actual fixed overhead incurred. It combines expenditure and volume effects and corresponds to over- or under-absorption on the same basis. Under marginal costing, fixed overhead is a period charge and the relevant fixed-cost variance is normally budget versus actual expenditure; there is no inventory-absorption volume variance. State the costing basis before choosing the calculation.

Worked example

Fixed overhead absorbed is $45,000 and actual incurred $52,000, giving $7,000 adverse total. Budget $50,000 explains $2,000 adverse expenditure and $5,000 adverse volume.

Common mistake

Do not assume a volume variance exists under every costing method or reverse the sign of under-absorption.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	MA	Direct	September 2026–June 2027
FIA	FMA	Direct	September 2026–June 2027