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Chilton allocates variable manufacturing overhead costs on the basis of machine hours. Chilton budgeted .5 machine hours per lamp and allocates overhead at a rate of $1.80 per machine hour. Last year Chilton manufactured 23,000 lamps, used 13,800 machine hours and incurred actual overhead costs of $15,180.
There is never an efficiency variance for fixed overhead because managers cannot be more or less efficient with fixed amount regardless of the output level. This results in the flexible budget variance amount being the same for the spending variance for fixed manufacturing overhead.