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Hello Mr John,
In one of Bpp Revision kit,
they were asking fixed overhead cost variance
in their answer they used the absorption rate per unit X actual no of units
but as we know that the fixed overhead variance is the absorption rate X actual labour hours worked
Is there any difference between the F.O.H cost variance and the over and under absorption amount,
Thank you in advance,
The fixed overhead volume variance is calculated the way that you have stated from BPP (and it is the same as the over or under absorption).
If it has been absorbed on an hourly basis (this is not always the case – it is only common really if they are producing more than one product) the the volume variance can be analysed into a capacity variance and an efficiency variance.
However, fixed overhead variances are now very unlikely to be asked in Paper F5 (because they are examined in Paper F2).
If you are worried and want to be 100% safe, then do watch my lectures on ‘basic variances’, but I would not worry about it too much – it is the other variances that are far, far more important for Paper F5.
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