Answer:
the fixed overhead variance is $1,660 (favorable)
Explanation:
The fixed overhead variance results from Fixed Overhead Expenditure (Spending) variance and Fixed Overhead Volume variance.
Expenditure Variance = Actual Fixed Overheads - Budgeted Fixed Overheads
= $4,800 - $6,750
= $1,950 (favorable)
Volume Variance = Budgeted overhead at actual activity - Budgeted fixed overhead
= ($6,750 ÷ 3,000/0.25) x 8,000 units - $4,800
= $300 (unfavorable)
Total Variance = Expenditure Variance + Volume Variance
= $1,950 (favorable) + $300 (unfavorable)
= $1,660 (favorable)
Conclusion :
the fixed overhead variance is $1,660 (favorable)
The total fixed overhead variance is $1,660 Favorable.
Here, we will calculate the expenditure and volume variance to enable us derive the total fixed overhead variance.
Expenditure Variance = Actual Fixed Overheads - Budgeted Fixed
Expenditure Variance = $4,800 - $6,750
Expenditure Variance = $1,950 Favorable
Volume Variance = Budgeted overhead at actual activity - Budgeted fixed overhead
Volume Variance = ($6,750 / (3,000/0.25)) * 8,000 units - $4,800
Volume Variance = $4500 Favorable - $4,800 Unfavorable
Volume Variance = $300 Unfavorable
Total Variance = Expenditure Variance + Volume Variance
Total Variance = $1,950 Favorable + $300 Unfavorable
Total Variance = $1,660 Favorable
Therefore, the total fixed overhead variance is $1,660 Favorable.
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