The fixed overhead volume variance shows why the fixed overhead is underallocated or overallocated because it is a volume variance.

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The fixed overhead volume variance compares the fixed overhead that was budgeted for a certain level of activity with the fixed overhead that was actually incurred, based on the actual level of activity. If the actual level of activity is higher than the budgeted level, the fixed overhead will be underallocated (meaning that more overhead was incurred than was budgeted). If the actual level of activity is lower than the budgeted level, the fixed overhead will be overallocated (meaning that less overhead was incurred than was budgeted). Therefore, the fixed overhead volume variance shows why the fixed overhead is underallocated or overallocated because it is based on a comparison of the budgeted level of activity with the actual level of activity.

The Fixed Overhead Volume Variance Shows Why the Fixed Overhead