A company has a budgeted fixed overhead of $100,000 and actual fixed overhead of

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Question: A company has a budgeted fixed overhead of $100,000 and actual fixed overhead of $90,000. What is the fixed overhead variance?

Options:

Correct Answer: $10,000 Favorable

Solution:

Fixed Overhead Variance = Actual Fixed Overhead - Budgeted Fixed Overhead = $90,000 - $100,000 = -$10,000 (Favorable)

A company has a budgeted fixed overhead of $100,000 and actual fixed overhead of $90,000. What is the fixed overhead variance?

A company has a budgeted fixed overhead of $100,000 and actual fixed overhead of $90,000. What is the fixed overhead variance?

Step 1: Identify the budgeted fixed overhead amount, which is $100,000.
Step 2: Identify the actual fixed overhead amount, which is $90,000.
Step 3: Use the formula for fixed overhead variance: Actual Fixed Overhead - Budgeted Fixed Overhead.
Step 4: Substitute the values into the formula: $90,000 - $100,000.
Step 5: Calculate the result: $90,000 - $100,000 = -$10,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the result is negative, it is favorable.

Fixed Overhead Variance – The difference between actual fixed overhead costs incurred and budgeted fixed overhead costs.
Favorable vs. Unfavorable Variance – Understanding that a negative variance indicates a favorable outcome when actual costs are less than budgeted.