{"id":120,"date":"2021-01-26T22:09:38","date_gmt":"2021-01-26T22:09:38","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=120"},"modified":"2021-07-27T22:45:57","modified_gmt":"2021-07-27T22:45:57","slug":"fixed-manufacturing-overhead-variance","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/chapter\/fixed-manufacturing-overhead-variance\/","title":{"raw":"Fixed Manufacturing Overhead Variance","rendered":"Fixed Manufacturing Overhead Variance"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Compute the fixed manufacturing overhead variance<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Fixed Overhead Variance<\/h2>\r\nBecause fixed overhead is not constant on a per-unit basis, any deviation from planned production causes the overhead application rate to be incorrect. We can calculate a fixed overhead variance by comparing:\r\n<p style=\"padding-left: 30px;\"><strong>Actual fixed overhead \u2013 Budgeted fixed overhead = Fixed Overhead variance<\/strong><\/p>\r\nFor Boulevard Blanks, the budgeted fixed overhead was $13,365 (notice the level of production does not matter since fixed costs remain the same regardless of volume) and the actual fixed overhead costs were $13,485.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>Boulevard Blanks\r\nPartial Income Statement\r\nFor the month ended July 31, 20XX<\/caption>\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Actual<\/th>\r\n<th class=\"r\" scope=\"col\">Budget<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td>Sales revenue<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable manufacturing costs<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct materials<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,080.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,880.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct Labor<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 46,500.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 43,740.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,395.00<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,944.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Fixed manufacturing costs<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,485.00<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,365.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost of Goods Manufactured and sold<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 99,460.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 97,929.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Gross Profit<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 78,740.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 80,271.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<p style=\"padding-left: 30px;\">Fixed Overhead variance = Actual fixed overhead \u2013 Budgeted fixed overhead<\/p>\r\n<p style=\"padding-left: 30px;\">= $13,485 actual fixed \u2013 $13,365 budgeted<\/p>\r\n<p style=\"padding-left: 30px;\">= $120 unfavorable variance<\/p>\r\nThis variance is unfavorable since we spent more on fixed costs than we had planned.\r\n\r\nThe module on allocating manufacturing overhead and the module on flexible and static budgeting will delve more deeply into the topic of manufacturing overhead variances.\r\n\r\nBefore you move on, check your understanding of the fixed manufacturing overhead budget variance.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]217944[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Compute the fixed manufacturing overhead variance<\/li>\n<\/ul>\n<\/div>\n<h2>Fixed Overhead Variance<\/h2>\n<p>Because fixed overhead is not constant on a per-unit basis, any deviation from planned production causes the overhead application rate to be incorrect. We can calculate a fixed overhead variance by comparing:<\/p>\n<p style=\"padding-left: 30px;\"><strong>Actual fixed overhead \u2013 Budgeted fixed overhead = Fixed Overhead variance<\/strong><\/p>\n<p>For Boulevard Blanks, the budgeted fixed overhead was $13,365 (notice the level of production does not matter since fixed costs remain the same regardless of volume) and the actual fixed overhead costs were $13,485.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>Boulevard Blanks<br \/>\nPartial Income Statement<br \/>\nFor the month ended July 31, 20XX<\/caption>\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Actual<\/th>\n<th class=\"r\" scope=\"col\">Budget<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td>Sales revenue<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 178,200.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Variable manufacturing costs<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct materials<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,080.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 38,880.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Direct Labor<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 46,500.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 43,740.00<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,395.00<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,944.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"3\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Fixed manufacturing costs<\/strong><\/td>\n<\/tr>\n<tr>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Allocated overhead<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,485.00<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 13,365.00<\/td>\n<\/tr>\n<tr>\n<td>Cost of Goods Manufactured and sold<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 99,460.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 97,929.00<\/td>\n<\/tr>\n<tr>\n<td>Gross Profit<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 78,740.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 \u00a0 80,271.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p style=\"padding-left: 30px;\">Fixed Overhead variance = Actual fixed overhead \u2013 Budgeted fixed overhead<\/p>\n<p style=\"padding-left: 30px;\">= $13,485 actual fixed \u2013 $13,365 budgeted<\/p>\n<p style=\"padding-left: 30px;\">= $120 unfavorable variance<\/p>\n<p>This variance is unfavorable since we spent more on fixed costs than we had planned.<\/p>\n<p>The module on allocating manufacturing overhead and the module on flexible and static budgeting will delve more deeply into the topic of manufacturing overhead variances.<\/p>\n<p>Before you move on, check your understanding of the fixed manufacturing overhead budget variance.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm217944\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=217944&theme=oea&iframe_resize_id=ohm217944\" width=\"100%\" 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