Chapter 9, Problem 10.2GBP

To determine

Concept introduction:

Fixed Overhead Spending/ Budget Variance:

It is the difference of actual and budgeted fixed overhead cost.

$\text{Fixed Overhead Budget Variance = Actual Fixed Overhead - Budgeted Fixed Overhead}$

Fixed Overhead Volume variance:

It is the difference of the allocated and budgeted fixed overhead cost.

$\text{Fixed Overhead Volume Variance = Allocated Fixed Overhead - Budgeted Fixed Overhead}$

Note: The allocated fixed overhead is calculated with the help of following formula:

$\text{Allocated fixed Overhead cost = Standard hours ×Predetermined fixed Overhead allocation rate}$

To indicate:

The Journal entry for Fixed Overhead Cost and related variances.