measure of utilization of plant facilities. The variance results when a plant is underutilized (idle), and actual production falls below the expected, budgeted, or normal activity, known as DENOMINATOR ACTIVITY.

The variance is unfavorable if the denominator hours exceed the actual hours allowed; otherwise, it is favorable.For example, assume that the denominator activity in machine-hours was 5000 and the fixed overhead applied rate is $6. The actual hours used were 4200. The idle capacity variance is (5000 4200) x $6 = $4800, an unfavorable variance because the company's plant was underutilized.