Final answer:
An unfavorable fixed overhead spending variance means that the company spent more on fixed overhead than planned. The average fixed cost curve would trend downwards, illustrating 'spreading the overhead' where fixed cost per unit decreases as production increases.
Step-by-step explanation:
An unfavorable fixed overhead spending variance indicates that the price of fixed overhead items cost more than budgeted. This means that the company spent more on fixed overhead costs (such as rent, salaries, or insurance) than they had planned in their budget. Fixed costs, commonly referred to as 'overhead', are costs that do not change with the level of production, and when divided by the quantity of output produced, yield the average fixed cost.
For instance, if the fixed cost is $1,000, regardless of how many units are produced, the average fixed cost curve would depict a downward trend, showing higher costs per unit at low levels of production and lower costs per unit as production increases. This demonstrates the concept of 'spreading the overhead', which means that as more units are produced, the fixed cost per unit decreases because the same total amount of fixed costs is spread over a greater number of units.