absorbed into production and the actual fixed overheads incurred during the period. This variance is calculated as the difference between the fixed overheads based on actual production volume and the fixed overheads based on the standard or budgeted production volume.

Two possible causes of the fixed overhead volume variance:

1. Change in Production Volume: A variance may arise due to an increase or decrease in production volume compared to the expected level, causing the fixed overhead to be spread over more or fewer units.
2. Changes in Demand: Fluctuations in market demand or sales can affect the actual production volume, thus influencing the fixed overhead costs allocated to the products.