Fixed overhead volume variance
The fixed overhead volume variance measures the difference between fixed production overhead absorbed for actual output and the fixed-overhead budget under a standard absorption system. Using a rate per standard hour, it is (standard hours for actual output − budgeted hours) × fixed overhead rate. It can be split into capacity and efficiency components. It does not represent additional cash fixed costs caused by the output difference and is not a standard marginal-costing variance.
Worked example
Budgeted hours are 10,000, actual output represents 9,000 standard hours and fixed rate is $5. Volume variance is 1,000 × $5 = $5,000 adverse.
Common mistake
A volume variance is an allocation effect relative to the budget, not proof that the same amount of extra cash was spent.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
