Accounting · Cost Accounting
In standard costing and variance analysis, which of the following statements accurately describes Fixed Overhead Variances?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Fixed Overhead Cost Variance is the difference between absorbed overheads (Standard Rate multiplied by Actual Output) and actual overheads, which is analyzed into Expenditure Variance and Volume Variance.✓
- 2Fixed Overhead Volume Variance is determined by subtracting actual fixed overheads from the budgeted fixed overheads.
- 3Fixed Overhead Expenditure Variance is defined as the difference between fixed overheads absorbed on actual output and the budgeted fixed overheads.
- 4Fixed Overhead Cost Variance is calculated by comparing standard overheads based on actual hours worked against actual overheads, and is primarily split into efficiency and rate sub-variances.
Correct answer
Fixed Overhead Cost Variance is the difference between absorbed overheads (Standard Rate multiplied by Actual Output) and actual overheads, which is analyzed into Expenditure Variance and Volume Variance.
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