Fixed overhead efficiency variance
Fixed overhead efficiency variance is the part of the fixed overhead volume variance caused by workers taking more or fewer hours than standard to produce actual output, at the fixed overhead rate per hour.
See it move
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Producing 3,100 units should take 6,200 standard hours, but the workforce actually worked 6,300 — 100 hours too many. At the €20-per-hour fixed overhead rate, that shortfall costs 100 times €20, or €2,000 adverse, measuring how efficiently the available hours were used, not how many there were.
Where it fits
SubjectManagerial AccountingAdvancedTopicStandard Costing & Variance AnalysisAdvanced
The formula
LaTeX
Variables
- Fixed overhead efficiency variance (€)
- Standard hours allowed for the actual output achieved (hours)
- Actual hours worked in the period (hours)
- Fixed overhead absorption rate per hour (€ per hour)
Isolates whether the workforce used more or fewer hours than the standard time allowed for the output actually achieved.