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fixed overhead spending variance

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Definition of fixed overhead spending variance

Fixed Overhead Spending Variance Image 1

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis



Related Terms:

Covariance

A statistical measure of the degree to which random variables move together.


Fixed asset

Long-lived property owned by a firm that is used by a firm in the production of its income.
Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents,
trademarks, and customer recognition.


Fixed asset turnover ratio

The ratio of sales to fixed assets.


Fixed cost

A cost that is fixed in total for a given period of time and for given production levels.


Fixed-annuities

Annuity contracts in which the insurance company or issuing financial institution pays a
fixed dollar amount of money per period.


Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).


Fixed-dates

In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are
referred to as the fixed dates.


Fixed Overhead Spending Variance Image 2

Fixed-dollar obligations

Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.


Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.


Fixed-exchange rate

A country's decision to tie the value of its currency to another country's currency, gold
(or another commodity), or a basket of currencies.


Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight
security because the optioned common stock is trading low.


Fixed-income instruments

Assets that pay a fixed-dollar amount, such as bonds and preferred stock.


Fixed-income market

The market for trading bonds and preferred stock.


Fixed price basis

An offering of securities at a fixed price.


Fixed-price tender offer

A one-time offer to purchase a stated number of shares at a stated fixed price,
usually a premium to the current market price.


Fixed-rate loan

A loan on which the rate paid by the borrower is fixed for the life of the loan.


Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.


Mean-variance analysis

Evaluation of risky prospects based on the expected value and variance of possible outcomes.


Mean-variance criterion

The selection of portfolios based on the means and variances of their returns. The
choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for
a given expected return.


Mean-variance efficient portfolio

Related: Markowitz efficient portfolio


Minimum-variance frontier

Graph of the lowest possible portfolio variance that is attainable for a given
portfolio expected return.


Minimum-variance portfolio

The portfolio of risky assets with lowest variance.
Minority interest An outside ownership interest in a subsidiary that is consolidated with the parent for
financial reporting purposes.


Portfolio variance

Weighted sum of the covariance and variances of the assets in a portfolio.


Serial covariance

The covariance between a variable and the lagged value of the variable; the same as
autocovariance.


Variance

A measure of dispersion of a set of data points around their mean value. The mathematical
expectation of the squared deviations from the mean. The square root of the variance is the standard deviation.


Variance minimization approach to tracking

An approach to bond indexing that uses historical data to
estimate the variance of the tracking error.


Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to
satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted
variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.


Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.


Fixed costs

Costs that do not change with increases or decreases in the volume of goods or services
produced, within the relevant range.


Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).


Non-production overhead

A general term referring to period costs, such as selling, administration and financial expenses.


Overhead

Any cost other than a direct cost – may refer to an indirect production cost and/or to a non-production expense.


Overhead allocation

The process of spreading production overhead equitably over the volume of production of goods or services.


Overhead rate

The rate (often expressed per hour) applied to the time taken to produce a product/service, used to allocate production overheads to particular products/services based on the time taken. May be calculated on a business-wide or cost centre basis.


Production overhead

A general term referring to indirect costs.


Semi-fixed costs

Costs that are constant within a defined level of activity but that can increase or decrease when
activity reaches upper and lower levels.


Tangible fixed assets

Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.


Variance analysis

A method of budgetary control that compares actual performance against plan, investigates the causes of the variance and takes corrective action to ensure that targets are achieved.


fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.


fixed expenses (costs)

Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. fixed operating costs provide capacity to carry on
operations and make sales. fixed manufacturing overhead costs provide
production capacity. fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.


overhead costs

overhead generally refers to indirect, in contrast to direct,
costs. Indirect means that a cost cannot be matched or coupled in any
obvious or objective manner with particular products, specific revenue
sources, or a particular organizational unit. Manufacturing overhead
costs are the indirect costs in making products, which are in addition to
the direct costs of raw materials and labor. Manufacturing overhead
costs include both variable costs (electricity, gas, water, etc.), which vary
with total production output, and fixed costs, which do not vary with
increases or decreases in actual production output.


Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.


Fixed Charge Coverage Ratio

A measure of how well a company is able to meet its fixed
charges (interest and lease payments) based on the cash
generated by its operations. It is calculated by dividing the
earnings before interest and taxes by the total interest charges
and lease payments incurred by the firm.


Variance

The weighted average of the squared deviations from the
expected value


applied overhead

the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account


budget variance

the difference between total actual overhead
and budgeted overhead based on standard hours allowed
for the production achieved during the period; computed
as part of two-variance overhead analysis; also
referred to as the controllable variance


controllable variance

the budget variance of the two variance approach to analyzing overhead variances


fixed cost

a cost that remains constant in total within a specified
range of activity


fixed overhead volume variance

see volume variance


labor efficiency variance

the number of hours actually worked minus the standard hours allowed for the production
achieved multiplied by the standard rate to establish
a value for efficiency (favorable) or inefficiency (unfavorable)
of the work force


labor mix variance

(actual mix X actual hours X standard rate) - (standard mix X actual hours X standard rate);
it presents the financial effect associated with changing the
proportionate amount of higher or lower paid workers in production


labor rate variance

the actual rate (or actual weighted average rate) paid to labor for the period minus the standard rate multiplied by all hours actually worked during the period;
it is actual labor cost minus (actual hours X standard rate)


labor yield variance

(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate);
it shows the monetary impact of using more or fewer total hours than the standard allowed


material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used


material quantity variance

(actual quantity X standard price) - (standard quantity allowed  standard price);
the standard cost saved (favorable) or expended (unfavorable)
due to the difference between the actual quantity
of material used and the standard quantity of material
allowed for the goods produced during the period


material mix variance

(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
it computes the monetary effect of substituting a nonstandard mix of material


material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance


noncontrollable variance

the fixed overhead volume variance;
it is computed as part of the two-variance approach to overhead analysis


overapplied overhead

a credit balance in the overhead account
at the end of a period; when the applied overhead
amount is greater than the actual overhead that was incurred


overhead

any factory or production cost that is indirect to
the product or service; it does not include direct material
or direct labor; any production cost that cannot be directly
traced to the product


overhead application rate

see predetermined overhead rate


overhead efficiency variance

the difference between total budgeted overhead at actual hours and total budgeted
overhead at standard hours allowed for the production
achieved; it is computed as part of a three-variance analysis;
it is the same as variable overhead efficiency variance


overhead spending variance

the difference between total actual overhead and total budgeted overhead at actual
hours; it is computed as part of three-variance analysis; it
is equal to the sum of the variable and fixed overhead
spending variances


predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


standard overhead application rate

a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate


total overhead variance

the difference between total actual overhead and total applied overhead; it is the amount of underapplied or overapplied overhead


total variance

the difference between total actual cost incurred
and total standard cost for the output produced during
the period


underapplied overhead

a debit balance in the overhead account at the end of a period; when the applied overhead amount is less than the actual overhead that was incurred


variable overhead efficiency variance

the difference between budgeted variable overhead based on actual input activity and variable overhead applied to production


variable overhead spending variance

the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity


variance

a difference between an actual and a standard or
budgeted cost; it is favorable if actual is less than standard
and is unfavorable if actual is greater than standard


variance analysis

the process of categorizing the nature (favorable or unfavorable) of the differences between standard and actual costs and determining the reasons for those differences


volume variance

a fixed overhead variance that represents
the difference between budgeted fixed overhead and fixed
overhead applied to production of the period; is also referred
to as the noncontrollable variance


Covariance

A measure of the degree to which returns on two assets move in
tandem. A positive covariance means that asset returns move together; a
negative covariance means they vary inversely.


Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.


Variance

The dispersion of a variable. The square of the standard deviation.


Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.


Factory overhead

All the costs incurred during the manufacturing process, minus the
costs of direct labor and materials.


Fixed asset

An item with a longevity greater than one year, and which exceeds a company’s
minimum capitalization limit. It is not purchased with the intent of immediate
resale, but rather for productive use within a company.


Fixed cost

A cost that does not vary in the short run, irrespective of changes in any
cost drivers. For example, the rent on a building will not change until the lease
runs out or is re-negotiated, irrespective of the level of business activity within
that building.


Fixed overhead

That portion of total overhead costs which remains constant in size
irrespective of changes in activity within a certain range.


Labor efficiency variance

The difference between the amount of time that was budgeted
to be used by the direct labor staff and the amount actually used, multiplied
by the standard labor rate per hour.


Labor rate variance

The difference between the actual and standard direct labor rates
actually paid to the direct labor staff, multiplied by the number of actual hours
worked.


Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.


Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per
unit.


Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.


Selling price variance

The difference between the actual and budgeted selling price for
a product, multiplied by the actual number of units sold.


fixed costs

Costs that do not depend on the level of output.


variance

Average value of squared deviations from mean. A measure of volatility.


Fixed Exchange Rate

An exchange rate held constant by a government promise to buy or sell dollars at the fixed rate on the foreign exchange market.


Investment Spending

Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.


Flexible Spending Account

A form of cafeteria plan allowing employees to pay
for some medical or dependent care expenses with pretax pay deductions.


Fixed-location storage

An inventory storage technique under which permanent
locations are assigned to at least some inventory items.


Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.


Fixed Expenses

Cost of doing business which does not change with the volume of business. Examples might be rent for business premises, insurance payments, heat and light.


Fixed Interest Rate

A rate that does not fluctuate with general market conditions.


Fixed Rate Loan

Loan for a fixed period of time with a fixed interest rate for the life of the loan.


Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


 

 

 

 

 

 

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