Using the same data, what is the total fixed overhead variance?
Answer and explanation
Correct answer: C. £5,500 adverse
- Step 1: Overhead absorbed = 2,000 × £12 = £24,000.
- Step 2: Actual fixed overhead = £29,500.
- Step 3: Total variance = £24,000 − £29,500 = £5,500 adverse (expenditure £700 + volume £4,800).
Answer
£5,500 adverse.
Why not the others: £4,800 adverse: This is the volume variance only. £700 adverse: This is the expenditure variance only. £4,100 adverse: This subtracts the expenditure variance from the volume variance instead of adding them.
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