Fixed Overhead Efficiency Variance:
Formula:
Following formula is used for the calculation
of this variance:
Fixed
overhead efficiency variance = (Actual hours
× Fixed overhead rate)  (Standard hours
allowed × Fixed overhead rate) 
Fixed
overhead efficiency variance is
calculated when
overall or net overhead variance is further
analyzed using four variance method. Other three
variances that are calculated in four variance
method are
overhead spending variance,
variable overhead
efficiency variance and overhead
idle capacity variance.
Example:
From the following
data calculate fixed overhead efficiency
variance:
Actual overhead 

$7,384 
Actual hours worked 

3,475 
Units produced during the period 

850 
Standard hours for one unit 

4 
Standard factory overhead rate: 


Variable 
$1.20 

Fixed 
$0.80 
$2.00 



Normal
Capacity in labor hours 

4000 hours 
Solution:
3,475
Actual hours worked × $0.80 fixed
overhead rate 
2780 
3,400
Standard hours allowed × $0.80 fixed
overhead rate 
2720 


Fixed
overhead efficiency variance
(unfavorable) 
$60 unfav 


When
variable overhead
efficiency variance and fixed overhead
efficiency variance are combined, they equal the
overhead efficiency variance.
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