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I don’t understand the cause of it! it says in the book that favourable fixed o/h variance is because of decrease in price, n seasonal effect. Please explain !
What price? What effect?
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The fixed OH expenditure variance is the difference between:
(a) What we planned to spend on overheads (budgeted), and (b) what we actually spent on overheads (actual)
Examples of causes: Price of heating oil increased/decreased (heating), price of electricity increased / decreased (lighting), or some other fixed OH cost changed.
To elaborate on your example: maybe there was unseasonably warm weather so we spent less on heating oil. Thus, favorable OH expenditure variance.
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