Q15RQ - Horngren'S Financial And Managerial Accounting

Question

Question: List the fixed overhead variances, and briefly describe each.

Step-by-Step Solution

Answer

Answer

The fixed overhead variances can be in the form of fixed overhead cost variance and fixed overhead volume variance.

Step 1 Definition of the fixed overhead

Fixed Overhead is defined as the set of costs incurred by the business that does not fluctuate with the change in the income level.

Step 2 Fixed overhead variance

The fixed overhead variances are as follows:

1. Fixed overhead cost variance: The fixed overhead cost variance that how the company keeps the total fixed overhead cost within the standards set by the business.
2. Fixed Overhead Volume Variance: The fixed overhead volume variance is not a cost variance; instead, it is volume variance that explains whether the fixed overhead is overallocated or under-allocated.