ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Kestrel Ltd budgeted fixed production overheads of $60,000 for the period, based on 12,000 units at 2 labour hours per unit. Actual fixed overhead expenditure was $63,500. What is the fixed overhead expenditure variance?
The fixed overhead expenditure variance is $3,500 adverse. It is the budgeted fixed overhead of $60,000 compared with the actual spend of $63,500, and because actual cost exceeded budget the variance is adverse.
- A$3,500 adverseCorrect
- B$3,500 favourable
- C$5,000 adverse
- D$1,500 adverse
Explanation
Expenditure variance = budgeted fixed overhead minus actual = $60,000 - $63,500 = $3,500. Actual spending exceeded budget, so it is adverse. $1,500 and $5,000 do not arise from the data.
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