Abuja Plastics Limited budgeted to produce 40,000 units in Q1 2024 but actually produced 44,000 units. Budgeted fixed overhead was ₦8,000,000 and actual fixed overhead incurred was ₦8,500,000. What is the fixed overhead volume variance?

The fixed overhead absorption rate is ₦8,000,000 ÷ 40,000 = ₦200 per unit. The volume variance = (Actual production – Budgeted production) × Standard absorption rate = (44,000 – 40,000) × ₦200 = ₦800,000 Favourable, because actual output exceeded budgeted output. The expenditure variance (₦500,000 Adverse) is a separate calculation and should not be confused with the volume variance.