# Fixed Overhead Variances — Hour Basis
When FOH is recovered on the basis of hours, the top-level variance structure remains identical, but the Volume Variance can be split into three sub-variances:
1. Calendar Variance — caused by different working days
2. Capacity Variance — caused by different hours per day
3. Efficiency Variance — caused by differing efficiency in hours used
## Top Level Structure (unchanged)
```
TOTAL FIXED OH COST VARIANCE
Recovered FOH − Actual FOH
│
┌─────────┴─────────┐
FOH EXPENDITURE FOH VOLUME
VARIANCE VARIANCE
Budgeted − Actual Recovered − Budgeted
```
## Volume Variance Sub-Variances
### 1. FOH Calendar Variance
$$= (\text{Actual Working Days} - \text{Budgeted Working Days}) \times \text{Budgeted Rate per Day}$$
where $\text{Budgeted Rate per Day} = \dfrac{\text{Budgeted FOH}}{\text{Budgeted Days}}$
### 2. FOH Capacity Variance
$$= (\text{Actual Hrs in Actual Days} - \text{Budgeted Hrs in Budgeted Days}) \times \text{Budgeted Rate per Hour}$$
### 3. FOH Efficiency Variance
$$= (\text{Standard Hrs} - \text{Actual Hrs}) \times \text{Budgeted Rate per Hour}$$
where $\text{Budgeted Rate per Hour} = \dfrac{\text{Budgeted FOH}}{\text{Budgeted Hours}}$
## Recovered FOH (hour basis)
$$\text{Recovered FOH} = \frac{\text{Budgeted FOH}}{\text{Budgeted Hours}} \times \text{Standard Hours for Actual Output}$$
## Reconciliation
Calendar + Capacity + Efficiency = Volume Variance