The Fixed Overhead Volume Variance Calculator helps businesses and finance professionals measure the efficiency of their production capacity usage. Specifically, it determines whether a company has over- or under-utilized its production capacity relative to what was originally planned or budgeted.
This variance is a key part of standard cost accounting and performance evaluation. It tells us how much of the total fixed overhead cost variance is due to differences in the volume of production, rather than spending behavior or overhead cost changes.
By using this calculator, users can identify if a plant or manufacturing facility is being run below or above its expected output level and how that impacts overhead recovery.
formula of Fixed Overhead Volume Variance Calculator
Fixed Overhead Volume Variance = Budgeted Fixed Overhead − Applied Fixed Overhead
To expand further:
Fixed Overhead Volume Variance = Budgeted Fixed Overhead − (Standard Fixed Overhead Rate × Standard Hours Allowed for Actual Output)
Where:
Budgeted Fixed Overhead = Total fixed overhead allocated for the planned level of activity
Standard Fixed Overhead Rate = Budgeted Fixed Overhead / Budgeted Activity Level (measured in standard hours or units)
Standard Hours Allowed for Actual Output = Standard time expected to produce the actual output achieved
This variance tells if the company produced more or less than expected, based on the standard cost system.
Common Reference Table for Fixed Overhead Variance Terms
| Term | Description | Example |
|---|---|---|
| Budgeted Fixed Overhead | Overhead costs allocated at the beginning of the period | $20,000 |
| Budgeted Activity Level | Expected production level in hours or units | 4,000 machine hours |
| Standard Fixed Overhead Rate | Overhead cost per hour/unit of production | $5/hour |
| Actual Output | Units actually produced | 800 units |
| Standard Hours per Unit | Time allowed to produce one unit | 0.5 hours |
| Standard Hours Allowed | Actual Output × Standard Hours per Unit | 800 × 0.5 = 400 hours |
| Applied Fixed Overhead | Standard Rate × Standard Hours Allowed | $5 × 400 = $2,000 |
This table can help users calculate without memorizing all steps.
Example of Fixed Overhead Volume Variance Calculator
Let’s say a factory budgeted $20,000 in fixed overhead for a period. It planned to produce 4,000 units using 1 standard hour per unit. That means:
- Budgeted Activity Level = 4,000 hours
- Standard Fixed Overhead Rate = $20,000 / 4,000 = $5 per hour
Now suppose the factory actually produced 3,500 units, with a standard time of 1 hour per unit:
- Standard Hours Allowed for Actual Output = 3,500 × 1 = 3,500 hours
- Applied Fixed Overhead = 3,500 × $5 = $17,500
Now compute the variance:
Fixed Overhead Volume Variance = $20,000 − $17,500 = $2,500 (Unfavorable)
This means the company used less of its planned capacity than expected, which results in under-absorbed fixed overhead.
Most Common FAQs
A positive variance (favorable) means actual production exceeded expectations, so more fixed overhead was applied. A negative variance (unfavorable) means actual output was lower than budgeted, so less fixed overhead was recovered.
It helps managers assess capacity planning and production efficiency. If unfavorable variances are frequent, it may signal underutilized equipment or poor forecasting.
It is typically reviewed monthly or quarterly as part of standard cost variance analysis, especially in manufacturing environments with stable production processes.