Question

5) Which of the following statements is true of *fixed overhead cost variances*?

A) The difference between actual costs and flexible budget costs will give the production volume variance.
B) The difference between actual costs and static budget costs will give the production volume variance.
C) The difference between flexible budget costs and allocated overhead costs will give the production volume variance.
D) The difference between static budget costs and flexible budget costs will give the production volume variance.

Answer 1

The true statement about fixed overhead cost variances is that the production volume variance is found by comparing actual costs to static budget costs.

Step-by-step explanation:

The statement that is true of fixed overhead cost variances is: The difference between actual costs and static budget costs will give the production volume variance. In other words, the correct option is B) The difference between actual costs and static budget costs will give the production volume variance. Fixed overhead cost variances are analyzed by comparing what was actually spent to what was expected to be spent (the static budget) at the actual level of production. This comparison helps businesses to understand how well they control fixed costs like rent, machinery, and salaries.

When analyzing fixed overheads, the production volume variance is the difference between what was expected as per the static budget, which anticipates costs at the anticipated level of output, and the actual volume of output.