Fixed overhead rate formula Manufacturing overheads form part of the product cost. Direct labor cost depends on the number of hours worked and the average hourly rate for labor directly involved in the manufacture of Jan 31, 2024 · Learn how to compute overhead cost variances with this easy-to-follow guide! Check out the article with examples & frequently asked questions provided. Mar 26, 2016 · When cost accounting, the more accurately you allocate fixed overhead costs, the more accurately your product’s total costs are reflected. e Mar 3, 2023 · Variable overhead in burden rate Budgeted fixed overhead Normal volume Applied overhead Over- or under-absorbed overhead Idle capacity variance Spending variance Solution 1. Fixed absorption is the extent to which the fixed departments (service, parts, and body shop) can cover the entire dealerships adjusted overhead expense (i. e. Wright has budgeted fixed manufacturing overhead for the year to be $624,000. Discover practical tips and formulas to manage expenses and optimize your business finances. Fixed overhead volume variance refers to the difference between the budgeted fixed overheads and the actual overheads applied to the units produced during an accounting period. Fixed Overhead Efficiency Variance (FOEfV)= Standard Fixed Overhead Rate per hour [Standard Production – Actual Production] Capacity Variance: It is that portion of the volume variance which is due to working at higher or lower capacity than the standard capacity. Jul 16, 2025 · Learn how to calculate and forecast overhead costs with accuracy—including the best methods and tools, strategies to manage spend, and common pitfalls to avoid. , a manufacturing company, provides the following data for the second quarter of Jan 19, 2025 · Businesses must calculate manufacturing overhead costs with the proper manufacturing overhead formula. In a standard cost system, accountants apply fixed manufacturing overhead to the goods produced using a standard overhead rate. It is obtained by dividing the factory expenses associated with the machine for a given period by the number of hours worked by the machine during that period. Using our example from above, if the variable and fixed costs per unit was £10, but the business omitted the £3 per unit overhead costs, they would be spending more than anticipated, which may lead to financial troubles. Total budgeted manufacturing overhead varies at different levels of standard output, but since some overhead costs are fixed, total budgeted manufacturing overhead does not vary in direct proportion with output. C. These costs are generally identifiable from the budgeted data. This factory overhead cost budget starts with the number of units that could be produced at normal operating capacity, which in this case is 10,000 units. Jul 16, 2019 · This free Excel overhead recovery rate calculator can be used calculate the amount of overhead to be absorbed by a unit of manufactured product. Fixed overhead spending variance and fixed overhead volume are often linked. Fixed Overhead Total Variance is the difference between actual and absorbed fixed production overheads over a period. Why Is It Important May 10, 2022 · Fixed Overhead Capacity Variance is difference between fixed overheads attributable to manufacturing hours and the budgeted fixed overheads. For businesses in manufacturing, establishing and monitoring an overhead rate can help keep expenses proportional to production volumes and sales. Here we discuss formula, example, and importance of applied overhead along with benefits. Know the overhead rate to increase your profit margin. A company must pay overhead costs regardless of production volume. The variance can be analyzed further into Fixed Overhead Capacity Variance and Fixed Overhead Efficiency Variance. Apr 5, 2025 · Understanding the nuances of fixed costs and the implementation of predetermined overhead rates is a cornerstone of managerial accounting and cost management. Allocating based on a single rate for Fixed overhead efficiency variance: It is the difference between actual hours worked and the number of hours actual production should have taken multiplied by the standard fixed overhead absorption rate. We show both variances in Figure 10. Nov 7, 2023 · What is applied overhead? Applied overhead is a fixed amount of cash added to a unit’s production cost in order to take into account the indirect costs of production. 3) Variable Overhead Rate Variance = (Actual Hours Jan 22, 2025 · It takes money, materials, time and labor to produce the goods you sell to customers, and knowing how to accurately use the overhead rates formula is essential to managing indirect production costs. The variance can help businesses identify inefficiencies or over-allocations in fixed costs based on actual versus budgeted production levels. The formula for the calculation is: Overhead Cost Variance: Actual Output X Standard Overhead Rate per unit - Actual Overhead Cost or Standard A business overhead ratio is a measurement of the operating costs of a business compared to its income. Overhead Costs Formula The formula for calculating a company’s overhead is as follows. ) Goldman allocates manufacturing overhead to production based on standard direct labor hours. Feb 4, 2025 · Learn how to calculate manufacturing overhead with simple steps. Factory Fixed Overhead Volume Variance quantifies the difference between budgeted and absorbed fixed production overheads. Applied overhead is a fixed rate charged to a specific production Nov 21, 2023 · Learn how to calculate a manufacturing overhead budget in this 5-minute video. Jul 16, 2019 · The fixed overhead variance journal entry is used to post the fixed overhead budget and volume variances to the standard costing bookkeeping system. Prime Cost Percentage Method 4. Oct 17, 2024 · The overhead rate shows how much overhead is spent for every dollar of direct costs, using the formula: (Total Indirect Costs / Total Direct Costs) x 100. Sep 16, 2024 · Calculate your way to a more profitable service business. Direct May 7, 2022 · Fixed Overhead Volume Variance is the difference in standard fixed overhead and budgeted overheads based production comparing actual to budgeted output. May 13, 2024 · Manufacturing overhead (MOH) cost is the sum of indirect costs to manufacture a product. Jan 8, 2024 · Master how to calculate overhead rates, allocate costs, and manage expenses with clear formulas and examples. According to the formula, the product's standard cost is calculated by adding the value of the direct material costs, the value of the direct labor costs, the value of the total variable overheads, and the value of the total fixed Fixed manufacturing overhead variance analysis involves two separate variances: the spending variance and the production volume variance. Budgeted factory-overhead rates are used when fixed costs can’t be directly determined, such as in budgeting and planning activities. Overhead costs are part of every business’s spending. Compute the standard variable overhead allocation rate and the standard fixed overhead allocation rate Select the formula, then enter the amounts and compute the standard Jul 27, 2023 · For Absorption costing, we need only material cost, labor cost, and overheads. Overhead is much more difficult to measure than direct materials or direct labor standards because overhead consists of indirect materials, indirect labor, and other costs not easily traced to units produced. These costs are not directly tied to the production of goods or services but are necessary for the business to function. The fixed manufacturing overhead volume variance is the difference between the amount of fixed manufacturing overhead budgeted to the amount that was applied to (or absorbed by) the good output. There is no standardisation of the terms or methods used for calculat­ing overhead variances. Historical Background The concept of variance analysis, including fixed It is common that the fixed manufacturing overhead costs are absorbed by the goods produced (or are assigned/allocated to the goods produced) through predetermined overhead rates based on the number of machine hours. In this article, the experts at Sling show you how to calculate and control these expenditures. Nov 5, 2025 · The fixed overhead spending variance is the difference between the actual fixed overhead expense incurred and the budgeted fixed overhead expense. Understand costs, formulas, and tips to improve budgeting and efficiency in production. 13 "Fixed Manufacturing Overhead Variance Analysis for Jerry’s Ice Cream", and provide further detail following the figure. In more technical terms, applied overhead is the predetermined rate of indirect expenses associated with production that is allocated to a cost object, such as a product or a job. Jul 5, 2023 · Manufacturing Overhead formula =Cost of Goods Sold–Cost of Raw Material–Direct Labour. Assume that the standard fixed overhead absorption rate for a product is $10 per unit, based upon a budgeted output of 1,000 units, and budgeted fixed overhead expenditure of $10,000. It includes the depreciation on equipment and machinery, indirect overheads such as indirect labor, indirect material, electricity, insurance, and repairs. Machine Hour Rate Method 6. Generally, the computation… Standard Cost Formula refers to the formula used by the companies to calculate the manufacturing cost of the product or the services produced by the company. Mar 26, 2016 · Not all companies manufacture products that require the same amount of overhead, and as a managerial account, you need to be able to calculate the overhead allocation. May 6, 2024 · Learn how to calcualate and track manufacturing overhead and capture costs that can help you create a more accurate budget. The expenditure incurred as overheads was 49,200 Fixed absorption is yet another area to scrutinize. Feb 13, 2025 · Fixed Overhead Volume Variance The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods. A reliable overhead absorption rate is crucial for budgeting purposes as it helps businesses forecast costs more accurately. Jul 31, 2021 · What Is Applied Overhead? Applied overhead is a type of direct overhead expense that is recorded under the cost-accounting method. Assume each unit consumes one direct labor hour in production. Budgeted (Overhead) Cost ~ BC The amount of overhead cost that is budgeted to be incurred during a period or process i. factory equipment What is the cost formula total fixed cost + (variable rate * unit of output) Mixed cost is computed using the formula Total Cost Study with Quizlet and memorize flashcards containing terms like Denominator Level, Fixed Overhead Flexible-Budget Variance, Formula for Fixed Overhead Flexible-Budget Variance and more. When the amount of overheads has been determined on the predetermined basis for each cost center, the next step is to charge it to production. Once you’ve added all your overhead costs together, you need to figure out the manufacturing overhead rate. The standard overhead rate is the total budgeted overhead of $10,000 divided by the level of activity (direct labor hours) of 2,000 hours. Businesses allocate fixed production overhead costs using predetermined rates or capacity-based methods to accurately determine product costs and make informed operational decisions. Improve your pricing, budgeting, and profitability. Guide to Absorbed Overhead and its definition. Fixed costs, by definition, are expenses that do not change with the level of production or sales. Accounting for manufacturing overheads aims to equitably assign overheads to units produced during a period. By understanding the components of overhead costs, accurately calculating the overhead rate, and implementing cost-saving strategies, you can optimize your restaurant's profitability and efficiency. Apr 4, 2025 · Fixed overhead costs represent a significant portion of the expenses that a company incurs to maintain its operations, regardless of its production volume or sales performance. Direct Labour Cost (or Direct Wages) Method 3. Jun 6, 2025 · Learn what a predetermined overhead rate is and how to calculate it so you can price your products, protect your margins and monitor your expenses. In this article, we’ll break down the steps, share practical tips, and help you master the calculation with confidence. Formula: Fixed overhead volume variance = (standard hours * fixed overhead absorption rate) – budgeted fixed overheads Study with Quizlet and memorize flashcards containing terms like Predetermined Overhead Rate Formula, Allocation Base, Y = a + bX and more. By allocating fixed manufacturing overhead by machine hours, the deluxe purse is actually costing more to produce than it is selling for. Learn what overhead costs are, why you should know your overhead costs and how to calculate your overhead costs. Jun 28, 2025 · The Fixed Overhead Volume Variance Calculator helps businesses and finance professionals measure the efficiency of their production capacity usage. Calculating fixed overhead cost variance based on output and time. The volume variance measures the effect of the actual output departing from the output used at the beginning of the period to compute the predetermined standard fixed overhead rate. Jan 30, 2025 · Learn how to calculate manufacturing overhead costs with clear formulas, step-by-step guidance, practical examples, and actionable tips to manage and reduce expenses effectively. It can help manufacturers know when to review their spending more closely, in order to protect their business’s profit margins. Nov 13, 2020 · Fixed overhead volume variance is the difference between fixed overhead applied to production for a given accounting period and the total fixed overheads budgeted for the period. An explanation to give an understanding on the variable overhead cost variance with an illustration. The following example is relatively simple because each product gets an equal amount of overhead. A Predetermined Overhead rate shall be used to calculate an estimate on the projects that are yet to commence for overhead costs. in burden rate Formula: = Difference in burden FOH / Difference in activity level = $4,000 / 4,000 hrs. Notice that fixed overhead remains constant at each of the production levels, but variable overhead changes based on unit output. Label the horizontal or x-axis of the graph as total machine hours (or some 1. Formula and Examples The formula for calculating the overhead rate involves Again, notice that dividing fixed manufacturing overhead by number of units makes the gross profit for the deluxe purse significantly higher than if fixed manufacturing overhead is allocated according to direct labor. Understand the formula through examples, then test your knowledge with a quiz. Jul 4, 2024 · Discover overhead costs, including types, examples, and their impact on businesses. Any change in volume or level of activity causes a change in the overhead rate. 60 per direct labor hour, while the standard variable manufacturing overhead rate is $0. Considering the fixed overheads cost, the dificulty arises in determining standard overhead rates because this is dependent on the volume or level of activity. Oct 20, 2018 · A common way to calculate fixed manufacturing overhead is by adding the direct labor, direct materials and fixed manufacturing overhead expenses, and dividing the result by the number of units produced. If total cost is accurate, you can add a profit and calculate an accurate sale price. Fixed absorption is yet another area to scrutinize. Learn how to manage and reduce these indirect expenses effectively. To more accurately allocate fixed overhead you use cost pools and cost allocations to compute a cost allocation rate. Units of output at 100% is 1,000 candy boxes (units). An allocation base is a cost accounting descriptor based on a common activity that affects overhead costs, like labor hours, machine hours, and cost Apr 26, 2024 · Step 3: Calculate Overhead Rate: The final step is to divide the overhead by sales to arrive at the overhead rate, which facilitates analysis of year-over-year (YoY) trends, as well as to be able to make comparisons to industry peers. How to Calculate the Overhead Rate Based on Direct Labor Cost. Specifically, it determines whether a company has over- or under-utilized its production capacity relative to what was originally planned or budgeted. Jul 5, 2021 · Fixed Overhead Volume Variance The fixed overhead volume variance is the difference between the budgeted fixed overhead and applied overheads. A low overhead ratio indicates a cost-efficient business. It helps to simplify the allocation of overhead costs to individual units of production. Oct 2, 2024 · How can manufacturing overhead be reduced? Overhead can be reduced by optimizing production processes, reducing waste, negotiating better rates for utilities and rent, investing in more efficient equipment, and improving inventory management. They set the rate prior to the start of the period by dividing the budgeted manufacturing overhead cost by a standard level of activity (called the base). You are free Mar 24, 2025 · Absorption costing is a managerial accounting method that captures all costs—both fixed and variable—associated with the manufacture of a particular product. May 3, 2023 · Causes of Overhead Variance The main causes of overhead variances are described in this section. Jun 10, 2024 · Conclusion Calculating and managing your restaurant's overhead rate is vital for financial health and long-term success. 40,000 for variable overhead cost and 80,000 for fixed overhead cost were budgeted to be incurred during that period. 4. Mar 26, 2016 · Standard costs need to account for overhead (the miscellaneous costs of running a business) in addition to direct materials and direct labor. View examples and formulas and learn how to calculate predetermined overhead rate. You are free Jun 8, 2019 · The analysis of factory overhead variances is more complex than variance analysis for direct materials and direct labour. Overhead Absorption: Rate, Examples, Formula and Methods Method # 1. Learn what the fixed overhead budget variance is, how to calculate it using a simple formula, and how to report and improve it in corporate accounting. The following information relates to Goldman, Inc. Jun 15, 2025 · The overhead rate is the total of indirect costs (known as overhead) for a specific reporting period, divided by an allocation measure. Aug 27, 2024 · Calculate manufacturing overhead costs by summing up your facility’s indirect expenses. Suppose a company uses a standard absorption rate of $ 15 per unit, for an estimated production of 1,500 units. Overhead costs are expenses that are not directly tied to production such as the cost of the corporate office. Total variable factory overhead costs are $50,000, and total fixed factory overhead costs are $70,000. Jun 8, 2019 · The analysis of factory overhead variances is more complex than variance analysis for direct materials and direct labour. Fixed overhead includes those unavoidable costs—like rent, salaries, and equipment—that don’t change with how much you produce. for the Normal/Budgeted activity. Mar 22, 2024 · Ready to learn how to calculate manufacturing overhead? By adding together your indirect manufacturing costs, you can quickly predict your indirect overhead. Mar 5, 2024 · Once you’ve added all your overhead costs together, you need to figure out the manufacturing overhead rate. The following are the various methods and techniques of absorbing manufacturing overhead: 1. Rate per Unit of Production Method 7. The rate is determined by dividing the fixed overhead cost by the estimated number of direct labor hours. Jun 22, 2023 · Determination of Variable Overhead Rate Variance The variable overhead rate variance, also known as the spending variance, is the difference between the actual variable manufacturing overhead and the variable overhead that was expected given the number of hours worked. Calculate the variable overhead efficiency Learn how to calculate manufacturing overhead with step-by-step formulas, examples, and methods to improve cost accuracy, pricing, and profitability. It calculates the total indirect factory-related costs the company incurs while producing a product. Let’s explore how this calculation works in detail. May 2, 2023 · Overhead absorption rate = (budgeted or actual overhead ÷ prime cost) x 100 Hourly Rate Methods Another popular method of calculating overhead absorption rate in the professional services industry is using rates or costs of the hours to establish a project’s share of the operational costs. , total dealership expense less expenses directly attributable to vehicle sales commission, delivery, and policy). The bases for allocating applied overhead i. Krypton Chemicals Corp. Direct Material Cost Method 2. It would involve calculating a known cost (like Labor cost) and then applying an overhead rate (which was predetermined) to this to project an unknown cost (which is the overhead amount). The formula to determine the applied overhead is applied overhead = predetermined overhead rate × direct labor hours. Jul 7, 2022 · To accurately assess profitability and price their products appropriately, businesses look at the overhead rate — the cost added on to the direct costs of production. Learn about the types and how to calculate. Here we discuss formula to calculate fixed and variable absorbed overhead rate with example. Knowing how to The rates are distinct for Variable, Fixed and Total Overheads. The costs are distinct for Variable, Fixed and Total Overheads. Predetermined overheads rate is the ratio of estimated overhead cost to the estimated units to be allocated and is used for allocation of expenses across its cost centers and can be fixed, variable or semi-variable. Feb 13, 2025 · Fixed Overhead Volume Variance is an important measure used in managerial accounting to assess how differences in actual and expected production volumes impact fixed overhead costs. The variable overhead rate variance is calculated using this formula: (8. For this reason, it is necessary to be familiar with the different approaches which can be applied in overhead variances. If a company produces more units than expected, it spreads these fixed costs over a larger number of units, reducing the fixed overhead cost per unit. 00 0. Variable Cost Rate/V. May 17, 2023 · The predetermined overhead rate formula can be used to balance expenses with production costs and sales. This formula provides the overhead cost assigned to each unit of production. . The manufacturing overhead rate (OH rate) is a key metric that expresses MOH as a percentage of direct labor cost or machine hours. Overhead costs are ongoing costs involved in operating a business. It is related to the under or over utilization of plant and equipment. Our guide breaks down how to calculate your overhead, absorption costs and other key expenses. Jan 29, 2025 · An overhead rate is a cost allocated to the production of a product or service. Here are two methods you can use to do this. Budgeted Fixed Overhead Fixed overhead volume variance is the difference between the amount budgeted for fixed overhead costs based on production volume and the amount that is eventually absorbed. Label the vertical or y-axis of the graph as Total Manufacturing Overhead (or Total Electricity Cost if you are analyzing the individual components of overhead). Over­heads for a period are aggregated and then assigned to units produced using a method that reasonably captures the demand of the units on resources represented by overheads. Nov 12, 2020 · Fixed overhead budget variance (also known as FOH spending variance) is the difference between the total fixed overhead as per the fixed overhead budget for a given accounting period and the total fixed overheads actually incurred during the period. Managers use a flexible budget to isolate overhead variances and to set the standard overhead rate. Fixed Overhead Volume Variance: Change in demand, interruption or stoppage of work due to defective planning, shortage of materials, absence of or faulty instructions, etc. The company allocates manufacturing overhead based on direct labor hours. Usually, an average rate per unit is calculated and Jun 8, 2023 · A predetermined overhead rate, also known as a plant-wide overhead rate, is a calculation used to determine how much of the total manufacturing overhead cost will be attributed to each unit of product manufactured. Fixed overhead volume variance is the difference between actual and budgeted (planned) volume multiplied by the standard absorption rate per unit. May 14, 2021 · Production volume variance measures overhead cost per unit of actual production against the expectations reflected in a business's budget. Predetermined Overhead Rate: Manufacturing overhead is an indirect production cost that cannot be traceable to the finished goods directly and hence requires allocation. This is different from the manufacturing overhead applied formula because it’s expressed as a percentage. The two types of overhead costs are fixed and variable. The costs could be fixed, variable, or semi-variable. A factory was budgeted to produce 2,000 units of output @ one unit per 10 hours productive time working for 25 days. The variance value reflects the over or under absorption of fixed overheads, and it arises due to a change in the quantum of production against the budgeted quantum of production. Learn what the overhead rate is, the formula to calculate it, and how you can reduce it. May 19, 2025 · Learn how to calculate manufacturing overhead using our simple formula with real-world examples. SG&A is not part of absorption costing Fixed Overhead Per Unit is calculated using the formula given below Fixed Overhead Per Unit = Fixed Overhead / Number of Units Produced Guide to what is Applied Overhead. For example, a company budgets for the allocation of $25,000 of fixed overhead costs to produced goods at the rate of $50 per unit produced, with I suggest that the first step in determining the fixed portion of a mixed cost (a cost that is partially fixed and partially variable) is to graph the data. This involves taking each cost center and applying its overheads to all the products that pass through it. Apr 11, 2025 · A predetermined overhead rate is an estimated ratio of overhead costs calculated before a project or job begins. Alternatively, the fixed overhead volume variance formula can be broken down to the standard fixed overhead rate multiplying with the difference between the actual and budgeted production volume as below: Fixed overhead volume variance formula (2): Actual production volume is the production that the company actually achieves (in hours) or produces (in units) during the period. Before the beginning of any accounting year, it is determined to estimate the level of activity and the amount of overhead required to allocate the same. Overhead cost variance can be defined as the difference between the standard cost of overhead allowed for the actual output achieved and the actual overhead cost incurred. The variance can be analyzed further into Fixed Overhead Volume Variance and Fixed Overhead Expenditure Variance. The figure in May 1, 2025 · Discover how to calculate business overhead costs, absorption rate methods, and the benefits of doing so with our comprehensive guide. In other words, overhead cost variance is under or over absorption of overheads. The formula for calculating Predetermined Overhead Rate is represented as follows. Fixed overhead expenditure variance is the difference between the budgeted fixed overhead expenditure and actual fixed overhead expenditure. Sale Price Method. Jun 9, 2025 · Learn how growing ecommerce brands calculate manufacturing overhead—including fixed, variable, and semi variable costs—and why it’s key to smarter pricing, inventory planning, and long-term profitability. Apr 11, 2024 · Budgeted Factory-Overhead Rate Definition The budgeted factory-overhead rate is an average overhead rate that you use to calculate the cost of products or services. Managing fixed production overhead costs effectively contributes to cost control, profitability, and strategic planning in businesses across various industries. Production volume variance is especially relevant when a company incurs fixed overhead costs that are spread over its units of production. May 9, 2025 · Learn how to calculate overhead costs and boost profitability. Direct Labour Hour Method 5. 's overhead costs for the month: (Click the icon to view the information. They are the steadfast variables in the Manufacturing Overhead is a kind of cost incurred in manufacturing the product, but those costs shall be indirectly associated with the process of manufacturing the product. Jan 17, 2020 · A predetermined overhead rate is calculated at the beginning of an accounting period and is used to apply manufacturing overhead to work in process. The factory worked for 26 days putting in 860 hours work every day and achieved an output of 2,050 units. Budgeted factory overhead rates are also known as planned overhead rates. 60 7,110 2,844 U 14. Therefore fixing the volume or level of activity is a crucial aspect in determining standard overhead rate. = $1 per hour 2. Calculate the variable overhead cost variance Select the formula, then enter the amounts and compute the cost variance for variable overhead (VOH) and identify whether the variance is favorable (F) or unfavorable (U) Actual Cost Standard Cost x Actual Quantity VOH Cost Variance 1. Comparing overhead to sales and labor costs helps evaluate your pricing, resource efficiency, and profitability. This application of overheads is Total budgeted manufacturing overhead varies at different levels of standard output, but since some overhead costs are fixed, total budgeted manufacturing overhead does not vary in direct proportion with output. Mar 3, 2023 · A machine hour rate is the hourly cost in terms of factory overheads to operate a particular machine. At a later stage, when the May 2, 2025 · Calculation of Overhead Rate To better understand how to allocate overhead costs to cost objects, it is essential to calculate the overhead rate. Mar 3, 2023 · Overhead Absorption: Definition Overhead absorption is defined as the allotment of overheads to cost units. Aug 30, 2023 · Calculating the overhead rate begins with determining which expenses of the company can be classified as overhead costs. Once the specific costs have been identified, the sum of all the costs is divided by revenue in the corresponding period. To calculate predetermined overhead rate, use this formula: Estimated manufacturing cost / Estimated total units in allocation base. Jul 24, 2025 · Overhead costs are a fundamental element of operating business. The overhead rate refers to the amount of indirect costs that gets allocated to direct costs for a product or service. The predetermined fixed manufacturing overhead rate is $16. 95 per direct labor hour. What is the formula to calculate the standard fixed overhead rate? Applied Fixed Overhead x Practical Capacity at Standard Actual Fixed Overhead - Applied Fixed Overhead Budgeted Fixed Overhead Costs ÷ Practical Capacity Total Fixed Overhead Variance ÷ Budgeted Fixed Overhead Costs 2. Question: 13. The following factory overhead rate may then be determined. Fixed Overhead Expenditure Variance: Spending more money than budgeted.