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    Question

    A company budgeted fixed factory overheads of

    ₹1,50,000 for the month based on a normal production level of 10,000 units. During the month, actual fixed overheads amounted to ₹1,80,000 and 12,000 units were produced. What is the Fixed Overhead Expenditure Variance?
    A ₹20,000 (Favourable) Correct Answer Incorrect Answer
    B ₹30,000 (Favourable) Correct Answer Incorrect Answer
    C ₹30,000 (Adverse) Correct Answer Incorrect Answer
    D ₹20,000 (Adverse) Correct Answer Incorrect Answer
    E Nil Correct Answer Incorrect Answer

    Solution

    Fixed Overhead Expenditure Variance = Budgeted Fixed Costs - Actual Fixed Costs = ₹1,50,000 - ₹1,80,000 = -₹30,000.   Since the actual cost is higher than the budget, the variance is adverse.   Note - Expenditure variance (or spending variance) relies solely on the difference between the actual cost incurred and the budgeted (or standard) cost allowed because it is specifically designed to isolate price and usage efficiency from volume changes. As such, the difference in units produced, does not impact the fixed overhead expenditure variance.

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